Please show how to solve with step by step. Thanks! Actual 31-Dec-15 Estimated 3

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Please show how to solve with step by step. Thanks!

Actual 31-Dec-15 Estimated 31-Dec-16 Estimated 31-Dec-17 Estimated 31-Dec-18 I Per Share PS 6.25 8.75 9.65 11.80 20.00 15.00 7.00 5.00 50.00 14% 10% 12% FFO FFI 6.00 8.00 4.00 18.0 12.00 8.00 16 6.00 V Liabilities ACC CFFO Cash Flow from operating activities CFFICash Flow from investing activities CF FFCash Flow from financing activities 12. Use the above forecasts to determine the intrinsic value of High Flyer shares. Use the discounted dividends model: assume the forecast dividend payment in 2019 is $5.25 and that it will growth by 9% per year in perpetuity. The appropriate intrinsic value at 12/31/2015 is a. $105.00 b. $17.50 C. $25.31 $78.46 e. $112.59 13.Assume you determined the share value in the previous problem to be $90 for the model price as at 12/31/2015. The computed time consistent price for a valuation date of 12/01/2016 would be a. $90.00 b. 99.85 c. 100.38 d. $101.49 14. (Senivity Analysis). You know that dividend growth rates are estimated with error. In the Problem 12, the dividend growth perpetuity was assumed to be 9% per year. What would be the impact on share price if the growth rate were assumed to be 6% (all other information remains the same a. $23.32 lower b. $23.32 higher c. $26.58 lower d. $26.58 higher e. $30.87 higher 19. (Residual Income Valuation). Compute the intrinsic value of Hi-Flyer's shares at the end of 2014 Assume residual income will be $7.50 in 2019 (perpetuity start) and 40% growth a. $34.95 b$44.10 C. $50.90 d. $42.95 e. $15.25

Explanation / Answer

15-Dec 16-Dec 17-Dec 18-Dec 19-Dec EPS 6.25 8.75 9.65 11.80 DPS 2.25 2.75 3 4.25 5.25 Cost of Equity [r] 14% Dividend growth [g] 9% As per dividend discount model intrinsic value = Dividend/(cost of equity - dividend growth) =D/(r-g) Here current price is computed as PV of divdends recived till year19 + price at year 2019 Price at Year 2019 105 =(5.25/(14%-9%)) PV facto of 14% (1/(1+14%)^n) 70.87201 =105*((1/(1+14%)^3)) Year 0 1 2 3 PV facto of 14% (1/(1+14%)^n) 1 0.877192982 0.769468 0.674972 Dividend 2.25 2.75 3 4.25 PV 2.25 2.412280702 2.308403 2.868629 Total of dividends 9.839312 Price + dividned 80.71132 Nearest answer (a) 78.46

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