- 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)
- Calculate the WACC of the firm.
- 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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