Calculate new constant growth rate

Assignment Help Finance Basics
Reference no: EM1363008

Philadelphia Corporation's stock recently paid a dividend of $2.00 per share (D0 = $2), and the stock is in equilibrium. The company has a constant growth rate of 5 percent and a beta equal to 1.5. The required rate of return on the market is 15 percent, and the risk-free rate is 7 percent. Philadelphia is considering a change in policy which will increase its beta coefficient to 1.75. If market conditions remain unchanged, what new constant growth rate will cause the common stock price of Philadelphia to remain unchanged?

Reference no: EM1363008

Questions Cloud

Draw flowchart to let a user play rounds of head : Draw a flowchart to let a user play 10rounds of head or tail guessing game. Display how many times the player has guessed the outcomes correctly.
Expected u.s. gdp growth rate : Expected U.S. GDP Growth Rate. - Explain what is the expected GDP Growth Rate in the U.S.? What are trends, forecasts, and statistics?
Describe kirk''s options and the legal arguments available : Describe Kirk's options and the legal arguments available to both sides and What is the likely outcome?
Case study - dave armstrong : Which job should Dave Armstrong take and how did you reach this conclusion and what key qualitative aspects did you focus on?
Calculate new constant growth rate : Philadelphia Corporation's stock recently paid a dividend of $2.00 per share, and stock is in equilibrium. The firm has a constant growth rate of 5% and a beta equal to 1.5.
Recommending human nutrition : Your close friend heard that you are taking Human Nutrition and you obviously know a great deal about fat and cholesterol.
Determine the weight of the collar : determine the weight of the collar.
Refusing to deduct a donation on schedule a : What do you think about this thought process? How could you convince someone that they should deduct their charitable contributions?
Describe the law as it applies to lucy''s situation : Describe the law as it applies to Lucy's situation as well as her rights in these circumstances

Reviews

Write a Review

Finance Basics Questions & Answers

  Construct a bond amortization table

Watson Bottle Corporation sold $400,000 in long-term bonds for $351,040. The bonds will mature in ten years and have a stated interest rate of 8% and a yield rate of 10 percent.

  Use annual compounding to calculate current price of bond

Nissan Company has a $1,000 par value bond outstanding paying annual interest of 7 percent. The bond matures in 20 years. The going rate of interest is 9 percent for this bond.

  Mortgage refinance

Suppose you have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $2,653 and you have made each pay on time.

  Use afn model to compute the maximum growth rate

ABC has the following ratios: A*/so=1.6, L*/so=0.4, profit margin=0.10 and dividend payout ratio=0.45. Sales last year were 100 million dollar. Suppose the ratios remain constant and apply AFN model to determent the maximum growth rate

  Estimation of external financing needed

Take the firm's most recent financial statements and project a 10 percent increase in sales. Estimate whether, and how much, external financing would be needed to support the projected increase in sales

  Define products or services as commodities

Explain whether you would view their products or services as commodities and define your reasoning

  Average annual inflation rate expected by investors

estimate the average annual inflation rate expected by investors over the life of the thirty- yr bond.

  Calculation of npv of two projects with different lives

Calculation of NPV of two projects with different lives and cash flows and considering a project that has the following cash flow and WACC data

  Forward versus spot rate forecast

Forward versus Spot Rate Forecast Assume that interest rate parity exists - forward rate of the Singapore dollar as the forecast or using today's spot rate as the forecast? Briefly describe

  Computation of total interest on the investment

Computation of total interest on the investment and how much total interest income would the money market lender receive

  Estimate current price of stock

A share of stock currently pays a dividend of $5. The dividend is expected to grow at a 20% yearly for next ten years, then it will grow at a 15% rate for 10 more years

  Determine the appropriate answer to stock

The fund you represent is a significant shareholder in Iron Man Industries which just paid a dividend of $5.25 per share is currently expected to increase in perpetuity at 5 percent every year.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd