1. Dylan Bearings is a young start-up company. No dividends will be paid on the shares over the next nine years because

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1. Dylan Bearings is a young start-up company. No dividends will
be paid on the shares over the next nine years because the firm
needs to plough back its earnings to fuel growth. The company will
pay an £8 per share dividend in 10 years and will increase the
dividend by 6 per cent per year thereafter. If the required return
is 13 per cent, calculate the current share price.
2. ABC plc. Had the following statement of cash flows ($
millions ) for 2013. The statement of cash flows included interest
payments of $1,084 million under “cash flow from operations”. The
tax rate is 26 per cent. What is the free cash flow to the
firm?
Cash flow from operations
21,100
Cash flow from investing activities
-7,855
Cash flow from financing activities
-10,400
If the discount rate for ABC is 12 per cent and the company’s
cash flows are expected to grow at 3 per cent every year. ABC has
10,000 million outstanding shares in 2013. What was the price
of ABC share?
3. Tiger plc. has a beta of 1.25 and has an earnings retention
ratio of 0.67 and the return on retained earnings is 9 per cent .
This year’s earnings per share were £3. The expected market return
is 14 per cent, and the return on Treasury bill is currently 6 per
cent. What is the current PE ratio for the company? What is the
prospective PE for the company? What is the present value of growth
opportunities?
4. What are the differences between common shares and
preferred shares?