• Students are advised to make their work clear and well presented.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Requirements: work clear and well presented | .doc file

College of Administrative and Financial Sciences

Assignment 3

Principles of Finance (FIN101)

Deadline: Week 8 (02/08/2021 @ 23:59)

Course Name: Principles of Finance	Student’s Name:
Course Code: FIN101	Student’s ID Number:
Semester: Summer	CRN: 30166
Academic Year: 1441/1442 H, Summer

For Instructor’s Use only

Instructor’s Name: Dema ALMohanna
Students’ Grade:   /5	Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY

• This assignment is an individualassignment.
• The Assignment must be submitted only in WORD format via allocated folder on Blackboard.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented. This also includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submitted assignments will NOT be entertained.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Assignment Questions:

Q1: Alaman Corp. just paid a dividend of $2.15 yesterday. The company is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Alaman require a rate of return of 15 percent, what should be the market price of Alaman’s stock?(1 mark)

Answer

Q2: Carrefour is expecting its new center to generate the following cash flows:

Years	0	1	2	3	4	5
Initial investment	($35,000,000)
Net operating cash flows		$6,000,000	$8,000,000	$16,000,000	$20,000,000	$30,000,000

a. What is the payback period for this new center. (1 mark)

b. Calculate the net present value using a cost of capital of 15 percent. Should the project be accepted? (1 mark)

Answer

Q3:Alfa corp has a capital structure which is based on 50% common stock, 20% preferred stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and the pre-tax cost of debt is 10%. The firm’s tax rate is 40%. (2 marks)

1. Calculate the WACC of the firm.
2. The firm is considering a project that is equally as risky as the firm’s current operations. This project has initial costs of $280,000 and annual cash inflows of $66,000, $320,000, and $133,000 over the next three years, respectively. What is the net present value of this project?

Answer

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