Suppose that a company must examine an investment today (1st January) costs 100 000 SEK. This investment would provide SEK 30 000 in cash to the company at the end of each year for the 5 coming years. The company's market value is SEK 5 000 000. The Company's stock is valued at SEK 250. Ignore taxes.
a) Calculate and answer whether the company should implement the investment on the company's cost of capital is 0?
b) Calculate and answer whether the company should implement the investment on the company's cost of capital is infinitely high?
c) Adopt a discount rate of 10% and cash flow under conditions decreases by 3% annually forever. Calculate and answer whether the company will implement the investment.
d) If the company has a discount rate of 10%, what will be the company's stock price if the implementation given basic conditions above?
e) Assume that a share pays 8 crowns in dividends now and is expected to increase by 6% continuously. What is the maximum price you are willing to give for this share if you have a required return of 21%?