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Finance: Share valuation.

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Valuation
Use the information provided to estimate the value of XYZ under each of the six assumptions.
Assume that XYZ Company generated cash flows of $2.00 per share last year. XYZ's cost of capital is 12%. Estimate the value per share of XYZ for each of the following sets of assumptions.
1. No future growth is expected.
2. Constant future growth of 6% is expected.
3. Growth of 10% per year is expected for the next three years, followed by constant growth of 6%.
4. Growth is expected to decline from 10% to 6% over the next four years, and then continue at 6%.
5. Growth of 10% per year is expected for the next two years, declining to 6% over the next four years, and then continuing at 6%.
6. Growth is expected to be 12% in year one, 11% in year two, 10% in year three, then decline to 6% over the next four years, and then continue at 6%.

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https://brainmass.com/economics/output-and-costs/399290

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The problem deals with determining the value, of a share, under different conditions.

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Calculate the price/value of each share in the firm, and explain how your wealth is affected if:

A. The firm pays out dividends of $1 per share.

B. The firm buys back 10,000 shares for $10 cash each, and you choose to sell your share back to the company.

C. The firm buys back 10,000 shares for $10 cash each, and you choose not to sell your share back to the company.

D. The firm declares a 2-for-1 stock split.

E. The firm declares a 10% stock dividend.

F. The firm buys new equipment for $100,000, which will be used to earn a return equal to the firm's discount rate.

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Year
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1
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2
5% 6%

3 3% 7%
4 12% 8%
5 10% 9%

B.
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Using your calculations from part A, calculate the 68%, 95%, and 99% confidence intervals for the two stocks. To calculate the 68%, you would calculate the top of the confidence interval range by adding one standard deviation to the expected return, and calculate the bottom of the confidence interval by subtracting one standard deviation from the expected return. For 95%, use two standard deviations, and for 99%, use three.

Your answer should show three ranges from the bottom of the confidence interval to the top of the confidence interval.

C.
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