For firm that is partly debt financed

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Reference no: EM131980506

1. Dietterich Electronics wants its shareholders to earn a return of 14% on their investment in the company. At what price would the stock need to be priced today if Dietterich Electronics had a

a. $0.20 constant annual dividend? forever?

b. $1.00 constant annual dividend? forever?

c. $1.60 constant annual dividend? forever?

d. $2.90 constant annual dividend? forever?

2. For a firm that is partly debt financed…

A. If WACC is used, unlevered free cash flows should be valued.

B. If WACC is used, actual free cash flows should be valued.

C. If Cost of Capital is used, unlevered free cash flows should be valued.

D. If Cost of Capital is used, actual free cash flows should be valued.

E. Both A and D are correct.

Reference no: EM131980506

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