Rapidly-currently needs to retain all of its earnings

Assignment Help Financial Management
Reference no: EM131329400

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 36% per year - during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 16%, what is the value of the stock today.

Reference no: EM131329400

Questions Cloud

Calculating return-calculate your total return for last year : Calculating returns: Last year you bought a share of 7.25 percent preferred stock for $63.75. Your stock's market price is now $66.92. Calculate your total return for last year.
Determine the beta coefficient for stock : Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 10.25%; rRF = 6.75%; rM = 8%. Round your answer to two decimal places.
Beta and new stock required rate of return : A stock has a required return of 9%; the risk-free rate is 2.5%; and the market risk premium is 3%. What is the stock's beta? New stock's required rate of return will be ......%.
Firm use to discount the project cash flows : Titan Mining Corporation has 8.9 million shares of common stock outstanding and 330,000 5 percent semiannual bonds outstanding, par value $1,000 each. What is the firm's market value capital structure? If the company is evaluating a new investment pr..
Rapidly-currently needs to retain all of its earnings : Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from toda..
Straight-line depreciation to zero for seven-year life : you purchased a machine for $ 1.13 million three years ago and have been applying? straight-line depreciation to zero for a? seven-year life. Your tax rate is 40 %. If you sell the machine today? (after three years of? depreciation) for $ 772000, wha..
Make single investment : Sarah Wiggum would like to make a single investment and have $2.4 million at the time of her retirement in 34 years. She has found a mutual fund that will earn 5 percent annually. How much will Sarah have to invest? today? If Sarah earned an annual r..
Experiencing rapid economic growth : In 1995, the Thai baht is pegged to a basket of currencies. Assume that the baht exchange rate is set at 25 baht per U.S. dollar. Thailand is experiencing rapid economic growth, with extensive ongoing foreign investment. Thailand has no problem in ma..
What is the required rate of return on a stock with beta : Expected and required rates of return Assume that the risk-free rate is 3% and the market risk premium is 8%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.5?

Reviews

Write a Review

Financial Management Questions & Answers

  Company is evaluating continuous baking oven

A company is evaluating a continuous baking oven. New oven would cost $685,000, including cost of equipment, shipping and installation. No increase in capcity with new oven, however operating expenses would be reduced by $105,000.

  Rate of return will lindsay need in order to achieve goal

Sam has just invested $35,000 for her newborn son in an education IRA. This money will be used for her son’s education 18 years from now. She calculates that she will need $200,000 by the time the boy goes to college. What rate of return will Lindsay..

  Considering paying off this high interest rate loan

Eric borrowed money last year to buy a new car for his part-time consulting work. The loan is a 3-year loan with 36 monthly payments. Due to his bad credit history, the loan he got is with a 12% annual interest rate compounded monthly. If Eric saved ..

  Salary increases at an average annual rate

Upon graduating from college, you make an annual salary of $31,546. You set a goal to double it in the future. If your salary increases at an average annual rate of 6.48 percent, how long will it take you to reach your goal?

  What must the expected return on this stock be

A stock has an expected return of 13.7 percent, the risk-free rate is 2.4 percent, and the market risk premium is 9.9 percent. What must the beta of this stock be? A stock has a beta of 1.25, the expected return on the market is 15 percent, and the r..

  What are implications for cash flow and shareholder wealth

Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. What are two tactics that a financial manager can use ..

  Research indicates that the organziational culture

Research indicates that the organziational culture. has very little impact on the individual employee's ethical behavior. has significant influence on the individual employees's ethical behavior.

  Payable over five years with monthly payments

A loan of 100,000 is payable over five years with monthly payments of 60,000 commencing one month after the inception date. The loan repayment is 2,000 per month and the nominal rate 10 per cent. How much capital remains at the end of five years? bui..

  After the phase-out for high-income taxpayers

Ellen and Rick are married with one dependent child. They have AGI of $355,300, and itemized deductions consisting of $20,000 state income taxes and $20,000 medical expenses, after applying the 10 percent of AGI limitation.  Itemized deductions allow..

  What is the largest profit it can realize

CalJuice Company has decided to introduce three fruite juices made from blending two or more concentrates. These juices will be packaged in 2-qt (64-oz) cartons. One carton of pineapple-orange juice requires 8 oz each of pineapple and orange juice co..

  The general journal entry to record this transaction

On September 1, Ziegler Corporation had 71,000 shares of $5 par value common stock, and $213,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journa..

  Straight-line depreciation to zero book value projects life

Safety Third Construction Corp is bidding upon a service contract for the University to maintain and upgrade three classrooms per year for the next nine years. The contract will require purchasing $1,605,000 in equipment that will be depreciated usin..

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