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Estimated net present value of future investment

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1. The Tasty Anchovy Corporation is expected to pay a cash dividend of $5 per share this year. You estimate that the market capitalization for this stock should be 10% per year. If the current price is $100 per share, what can you infer about its expected growth rate of dividend?

2. The Cayman Construction Company (CCC) has expected next period earnings of $5.00 per share, retains 40% of its earnings, has a market capitalization rate of 9%, and expects to earn 12% on its new investments.

What is your estimate of the current share price of CCC?

What is the estimated net present value of CCC’s future investment?

3. JKL Corporation is an all-equity financed firm with a total market value of $50 million. The company holds $10 million in cash equivalents and has $40 million in other assets. There are 1,000,000 shares of JKL common stock outstanding, each with a market price of $50.What would be the impact on JKL’s stock price and on the wealth of its shareholders

The company pays cash dividend of $5 per share.

The company repurchases 100,000 shares.

The company issues a 20% stock dividend to new shareholders.

Reference no: EM131942776

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