Question

Problem #2 (4 marks) Canadian Tire Corp Ltd is a that sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories. Canadian Tire's shares are publicly traded and listed on the Toronto Stock Exchange. Using the Canadian Tire website, provide a description of the characteristics of the shares of the company. leading Canadian retailer that operates a nationwide store network Problem #3 (13 Marks) Nova Leaf Inc. is considering some strategies for expansion as shown below. To fund the expansion, the company expects not to pay any dividends for the next three years. They are considering the following 2 options for the expansion. The third option is to maintain the status quo, i.e., forego expansion. Option #1: If they select this option, the management believes that they will pay a smaller dividend of $2.25 at the end of year 4 for 3 years. The management predicts this option would then allow the dividends to grow at a rate of 8% forever. Investors' required return for this option would be 13%. If they select this option, the management expects to begin to pay dividends of $3.05 at the end of year 4 and they expect that dividends will grow at a rate of 3% forever. Based on the risk assessment of this project, investors will require a rate of return of 11%. Dividends would continue uninterrupted. The last dividend paid was $2.10, with growth expected of 2.75% forever. Investors currently require a return of 11.5% Option #2 Option #3:

Answer 1

Date Prblem-3 stim we have to calculat Tn this fair toay sharre oblion0 9.35 (1-08) 9-25 CIto 13)4 1t13)4 O-13 -008 1.380 t 29.807 $31.187 3-05 (-03) Option 2 3-0S (It0-1 (1--11 -11-0-6.3 d009 t 5:867 27.876 2-10 (1to0SF5) sptian Steo.o -sil the Ah abtim ALturnative ammg pptim -Dis Beacuse itha cthor Best camban to Hizhezt fo (S 31-18 Discoumt Model Dividend formula usl OPS C1+9J Ke g