Reference no: EM132493027

1. Declining FCF Growth Valuation

Question 1: Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's free cash flows are declining at the constant rate of 6% per year. If its current free cash flow (FCF0) is $4 million and its weighted average cost of capital (WACC) is 11%, what is the estimated value of Brushy Mountain's value of operations? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to two decimal places.

2. Nonconstant Dividend Growth Valuation

Conroy Consulting Corporation (CCC) has a current dividend of D0 = $1.00. Shareholders require a 14% rate of return. Although the dividend has been growing at a rate of 25% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 25%). After Year 2, the growth rate will stabilize at gL = 8%.

Question A. What is CCC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent.

Question B. What is the expected stock price at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent.

Question C. What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? Do not round intermediate calculations. Round your answers to two decimal places.

Dividend yield: %

Capital gains yield: %T

total return: %

Question Question What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return? Do not round intermediate calculations. Round your answers to two decimal places.

Dividend yield: %
Capital gains yield: %
Total return: %

3. Preferred Stock Rate of Return

Question 3: What is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 10% of par, and a current market price of (a) $23, (b) $34, (c) $45, and (d) $63 (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answers to two decimal places.