ANSWERS TO PROBLEM QUESTIONS CHAPTER 6 (Book)
Question 1:
D0
g
R
t
t
2,57
0,04
0,11
4
16
P0
38,18
P4
42,95
P 16
68,77
Question 2:
D1
2,14
P0
g
32
0,044
R
11,09%
Question 3:
D1
2,14
P0
32
Dividend Yield
Capital gain yield
6,69%
4,4%
R
11,09%
Question 4:
D1
R
g
3,08
0,11
0,046
P0
48,13
Question 5:
Div yield
Cap gain yield
0,041
0,054
R
9,50%
Question 6:
P0
r
Div. Yield = Cap Gain Yield
Cap Gain Yield = g
63
10,4% ´= Div Yield + Cap G. Yield
5,2%
5,2%
D1
3,28
D0
3,118
Question 7:
10,25 10,25 10,25
1
2
3
…
…
P0 ?
D
k
Years
10,25
0,097
Dividends
PV of dividends
1
10,25
9,34
2
10,25
8,52
3
10,25
7,76
4
10,25
7,08
5
10,25
6,45
6
10,25
5,88
7
10,25
5,36
8
10,25
4,89
P0
55,29 €
Question 8:
D
P0
D/P0
R
3,85
108
3,56%
10,3
8
0
0
9
10
0
…
Question 10:
D1
2,86
2,86
2,86
Red
Yellow
Blue
g
0,05
0,05
0,05
R
0,08
0,11
0,14
P0
95,33
47,67
31,78
The higher the reqired return, the lower the price
Question 13:
PE
EPS
18
21
2,14
2,14
P0
38,52
44,94
Question 14:
D0
g
R1
2,73
0,04
0,15
R2
0,13
R3
0,1
1
2
3
4
5
6
D0
D1
D2
D3
D4
D5
D6
D7
2,73 2,8392 2,953 3,071 3,1937 3,32 3,4543 3,592
59,87 P6 = Perpetuity (D7/(R-g))
P3 (discounting al 13%)
49,32
PV
P 0 (discounting at 15%)
2,47
39,15
Question 15:
D12
g
R
P11
P0
17
5,5%
0,13
226,67
59,1
2,23
2,02
32,43
2,83 2,60
2,39
41,50
Question 16:
D0
r
13
0,11
D0
13
PV
1 D1
16,5
14,86
2 D2
20
16,23
3 D3
23,5
17,18
4 D4
27
17,79
5 D5
30,5
18,10
P0
84,17
Question 17:
D4
g
R
2,85
0,05
0,1
D5
2,9925
PV
1 D1
12
10,91
2 D2
8
6,61
3 D3
7
5,26
2,85
59,85
1,95
40,88
4 D4
4 perpetuity
P0
65,60
Question 18:
D0
2,65
g1
0,27
g2
R
0,045
0,104
D4
5,67
PV
1 D1
3,37
3,05
2 D2
4,27
3,51
5,43
96,14
4,03
71,45
3 D3
3 perpetuity
P0
82,04
Question 20:
D0
g
R
16
-0,03
0,093
P0
126,18
Question 21:
57,13
0,05
0,11
3,43
P0
g
R
D1
D0
3,26
Question 22:
P0 ?
0
0
0
1
2
3
…
0
0
8
9
6
6
6
10
11
12
6
…
D10-…
6
D1-10
R
0
0,046
P9
130,43
P0
87,02
Question 27:
R
12,18%
Question 29:
g
R
0
0,12
Earnings ($ mn)
Total Div
Pacific EnergyUS
CoBluechips Inc.
1,1
1,1
1,1
1,1
Market Cap ($ mn)
(Total Div / g)
P/E
Earnings ($ mn)
Total Div
Market Cap ($ mn)
(Total Div / g)
9,17
8,3
Pacific Energy Co US Bluechips Inc.
1,32
1,54
1,32
1,54
11,00
12,83
P/E (with new earnings 1,32 mn)
8,3
8,3
P/E (with current earnings 1,1 mn)
10
11,7
Question 30:
EPS
PE
g
EPS in one year
3,83
19
0,065
4,1
P0
72,77
P1
77,5
Question 31:
Sales
Costs
Debt
Cash
nº shares
Industry EV/EBITDA
EBITDA
Net Debt
31,5
17,3
59
21
975000
7,5
14,2
38
EV
Equity
share price
106,5
68,5
70,26
Question 32:
Year 1
Year 2
Year 3
Year 4
Year 5
$153,000,000
$174,420,000
$195,350,400
$214,885,440
$232,076,275
Sales
82,000,000
93,480,000 104,697,600 115,167,360 124,380,749
Costs
$71,000,000 $80,940,000 $90,652,800 $99,718,080 $107,695,526
EBT
28,400,000
32,376,000
36,261,120
39,887,232
43,078,211
Taxes
Net income $42,600,000 $48,564,000 $54,391,680 $59,830,848 $64,617,316
15,000,000
17,100,000
19,152,000
21,067,200
22,752,576
Investment
$27,600,000 $31,464,000 $35,239,680 $38,763,648 $41,864,740
Cash flow
Terminal value (perpetuity) = $783,987,028
Company value today = $542,873,656
Share price = $542,873,656/6,200,000
Share price = $87.56
Terminal value (using PE) = $821,932,257
Company value today = $562,097,890
Share price = $90.66
Question 35:
P0
66,31
Year 6
$246,000,852
131,843,594
$114,157,258
45,662,903
$68,494,355
24,117,731
$44,376,624