34.You are an stock analyst hired to follow Jones Kenesyian Consulting (whose ti
ID: 1175587 • Letter: 3
Question
34.You are an stock analyst hired to follow Jones Kenesyian Consulting (whose ticker is JK), the firm recently paid a dividend of $2 per share, and you expect JK to grow at 10% for the next 3 years afterwhich you make an assumption that it will grow at a constant rate of 5%. You required rate of return is 12%. What do you believe the intrisic value of the stock is today?
33. Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT?
A project's IRR increases as the WACC declines.
A project's NPV increases as the WACC declines.
A project's MIRR is unaffected by changes in the WACC.
A project's regular payback increases as the WACC declines.
A project's discounted payback increases as the WACC declines.
32.
Which of the following statements is CORRECT?
One defect of the IRR method versus the NPV is that the IRR does not take account of cash flows over a project's full life.
One defect of the IRR method versus the NPV is that the IRR does not take account of the time value of money.
One defect of the IRR method versus the NPV is that the IRR does not take account of the cost of capital.
One defect of the IRR method versus the NPV is that the IRR values a dollar received today the same as a dollar that will not be received until sometime in the future.
One defect of the IRR method versus the NPV is that the IRR does not take proper account of differences in the sizes of projects.
A project's IRR increases as the WACC declines.
A project's NPV increases as the WACC declines.
A project's MIRR is unaffected by changes in the WACC.
A project's regular payback increases as the WACC declines.
A project's discounted payback increases as the WACC declines.
Explanation / Answer
Intrinsic value = 34.21
33.
A project's NPV increases as the WACC declines.
34.
One defect of the IRR method versus the NPV is that the IRR does not take proper account of differences in the sizes of projects.
Discount rate 12.0000% Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow - 0 - - 2.200 1 1.96 1.96 2.420 2 1.93 3.89 2.662 3 1.89 5.79 39.930 3 28.42 34.21Related Questions
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