# Calculate the value of the stock today

## Description

This homework submission should include all calculations, completed on the designated tab of the Homework Student Workbook,
and a document explaining the implications of your findings for the

1. Turbo Technology Computers is experiencing a period of rapid growth.
Earnings and dividends are expected to grow at a rate of 15% during the
next two years, at 13% in the third year, and at a constant rate of 6%
thereafter. Turbo’s last dividend was \$1.15, and the required rate of
return on the stock is 12%.

Complete the following calculations:

1. Calculate the value of the stock today.
2. Calculate P1^ and P2^.
3. Calculate the dividend yield and capital gains yield for Years 1, 2, and 3.
1. Kassidy’s Kabob House has preferred stock outstanding that pays a
dividend of \$5 at the end of each year. The preferred sells for \$50 a
share. What is the stock’s required rate of return? Assume the market is
in equilibrium with the required return equal to the expected return.
1. McCaffrey’s Inc. has never paid a dividend, and when the firm might
begin paying dividends is not known. Its current free cash flow (FCF) is
\$100,000, and this FCF is expected to grow at a constant 7% rate. The
weighted average cost of capital (WACC) is 11%. McCaffrey’s currently
holds \$325,000 of non-operating marketable securities. Its long-term
debt is \$1,000,000, but it has never issued preferred stock. McCaffrey’s
has 50,000 shares of stock outstanding.

Calculate the following:

1. McCaffrey’s value of operations
2. The company’s total value
3. The estimated value of common equity
4. The estimated per-share stock price

Rubric document in the Assignment Guidelines and Rubrics section of the
course.