1.1. Estimate a second stage (also called the stable stage) growth rate in dividends, g2, for use in the Two-Stage
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he Two-Stage DDM. Your estimate for g2 is the growth rate that you expect will continue “forever” in the second stage. Your estimate for g2 should not be much greater than the expected future growth in the overall economy (expected growth in GDP). Why? LIST your estimate for g2 and provide a short paragraph that EXPLAINS your reasoning AND the source of your estimate for long-term growth in GDP. Finally, estimate and LIST a price per share for KO using your estimates for g1, N, Re, g2 and KO’s current annual dividend (most recent quarterly dividend x 4) as D(0) in the Two-Stage DDM (submit your spreadsheet).
2. Calculate KO’s FCFF for EACH of the past five (5) years using the financial statement data found in KO’s annual reports and using the FCFFM.xls template. The template will calculate the annual FCFF value for you, but you MUST insert the correct input values for Depreciation & Amortization, Capital Investment, Capital Sales, etc.
3. Assume that the average annual FCFF from Q5 is good estimate of KO’s FCFF(0) for use in the FCFM. LIST your estimate for FCFF(0) then estimate and LIST a price per share for KO using your estimates for g1, N, WACC, g2 and FCFF(0) in the Two-Stage FCFFM (submit your spreadsheet).Use the same estimate second stage or stable stage growth, g2, in the FCFFM that you selected for the DDM.
4. Apply Relative Valuation methods to Coca-Cola (KO) using the following three (3) popular relative valuation ratios - Price/Earnings, Price/Book, Price/Sales (call these three ratios Price/”X” ratios). Select at least five (5) comparable firms that are in the same industry as KO and use the average P/X ratio for the group of comparable firms in your valuation analysis. The P/X ratios for the template can be found by using the screener on the Finviz.comwebsite. Use the Relative Valuation (RV) Excel spreadsheet tab found in the Two Stage_DDM_FCFE_FCFF_RV.xlsx file.
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2.Credit card sales The National Association of Retailers reports that 62% of all purchases are now made by credit card;
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de by credit card; you think this is true at your store as well. On a typical day you make 20 sales.
Show that this situation can be modeled by a binomial distribution. For credit, you must discuss each of the criteria required for a binomial experiment.
Define the random variable x in this scenario, using the context of the problem.
List all possible values of x for this situation.
On one trial for this scenario, what does “success” mean? Explain using the words of the problem.
What is the probability of success in this scenario?
What is the probability of failure in this scenario?
Probability Distribution Instructions¬¬¬¬
In Excel, create a probability distribution for this scenario.
Label Column A as “x” and Column B as “P(x).”
In Column A, list the numbers 0 to 15.
In Column B, use BINOM.DIST.RANGE to calculate the probability for each x value.
Highlight the probability cells, then right click and select Format Cells. Format the probability cells as “Number” and have Excel show 4 decimal places.
Create a probability histogram using the probabilities you calculated. Format and label it properly. Be sure to use the “Select Data” button to change the x-axis so it correctly lists the x-values.
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3.A manufacturer of bicycles builds 1-, 3- and 10-speed models. The bicycles are made of both aluminum and steel. The
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uminum and steel. The company has available 38 comma 160 units of steel and 48 comma 380 units of aluminum. The 1-, 3-, and 10-speed models need, respectively, 8, 12 and 16 units of steel and 15, 10, and 20 units of aluminum. The company makes $4 per 1-speed bike, $6 per 3-speed, and $16 per 10-speed. Use the simplex method to complete parts (a) and (b).
(a) How many of each type of bicycle should be made in order to maximize profit? What is the maximum profit?
Set up the linear programming problem. Let x 1, x 2, and x 3 represent the numbers of 1-, 3-, and 10-speed bicycles, respectively, and let z be the total profit.
▼
Minimize
Maximize
zequals
nothing
subject to
8 x 1 plus 12 x 2 plus 16 x 3
▼
greater than
less than or equals
greater than or equals
less than
nothing
15 x 1 plus 10 x 2 plus 20 x 3
▼
greater than
less than or equals
less than
greater than or equals
nothing
x 1greater than or equals0, x 2greater than or equals0, x 3greater than or equals0.
(Do not factor. Do not include the $ symbol in your answers.)
Set up the initial simplex tableau and use the Simplex Method to solve.
The maximum profit is $
nothing. To get that profit, the company should make
nothing 1-speed bicycle(s),
nothing 3-speed bicycle(s), and
nothing 10-speed bicycle(s).
(Type whole numbers.)
(b) Explain what the values of the slack variables in the optimal solution mean in the context of the problem. Select the correct choice below and, if necessary, fill in the answer box(es) to complete your choice.
A.
When the profit is maximized, all of the steel is used but
nothing units of aluminum remain unused.
(Type a whole number.)
B.
When the profit is maximized, some of each material remains unused. Specifically,
nothing units of aluminum and
nothing units of steel remain unused.
(Type whole numbers.)
C.
When the profit is maximized, all of the available aluminum and steel is used.
D.
When the profit is maximized, all of the aluminum is used but
nothing units of steel remain unused.
(Type a whole number.)
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