What is the value of the stock today

Assignment Help Financial Management
Reference no: EM131059127

Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 26% per year - during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Microtech is 15%, what is the value of the stock today? Round your answer to the nearest cent. $

Reference no: EM131059127

Questions Cloud

Four-year project to improve production efficiency : Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $480,000 is estimated to result in $195,000 in annual pretax cost savings.
What will be the annual rate of return on the bond : A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $112 and is selling at face value. What will be the annual rate of return on the bond if its yield to maturity at the end of the year is 6%? 11.2%? 13.2%?
What is the NAV of the fund and Expected NAV : A mutual fund has 400 shares of General Electric, currently trading at $14, and 400 shares of Microsoft, Inc., currently trading at $29. The fund has 1,000 shares outstanding. What is the NAV of the fund? If investors expect the price of General Elec..
Expected portfolio returns : Expected Portfolio Returns. If a portfolio has a positive investment in every asset, can the expected return on the portfolio be greater than that on every asset in the portfolio? Can it be less than that on every asset in the portfolio?
What is the value of the stock today : Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.  If the required return on Microtech is 15%, what is the value of the stock today?
What does the market believe will be the stock price : Constant growth You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50) has a beta of 0.9. The risk-free rate is 2.9%, and the market risk premium is 4.0%. Ass..
Dividends are expected to grow at rate : Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 12 percent, and the company just paid a di..
Diversifiable and nondiversifiable risks : Diversifiable and nondiversifiable risks. In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic ..
Marginal cost of capital schedule : Steve and Styles (S&S) are constructing its Marginal Cost of Capital (MCC) schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. What is S&S cost of preferred stock?

Reviews

Write a Review

Financial Management Questions & Answers

  Accumulated on the day that he retires

After retirement, Mario expects to live another 25 years. If he requires $120,000 at the end of each year and interest rates are 7%, how much will Mario need to have accumulated on the day that he retires?

  What are the two components of total return for a bond

Suppose the market for lending is risk-free and perfectly efficient. Use an arbitrage argument to show there can only be one market interest rate. What are the two components of total return for a bond? How do bond dealers make money?

  Which dividend are expected to grow at rate

The ramirez company's last dividend was 1.75. it's dividend growth rate is expected to be constant at 25% for 2 years after which dividend are expected to grow at rate of 6% forever. it's required return is 12% what is the best estimate of the curren..

  Disregard tax shield from amortization of flotation costs

Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%. If the flotation cost is 3% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield..

  Bond with an invoice price-what is the clean price of bond

You purchase a bond with an invoice price of $1152.32. The bond has a coupon rate of 8.39 percent, and there are 4 months to the next semi annual coupon date. What is the clean price of the bond?

  Coupon bond with annual payments

Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 10.9 percent and the maturity date is 11 years from today. What is the market price of this bond if the face value is $1,000?

  Average project of that firm has coefficient of variation

A firm is considering a new project that has a cost of $1,000. Suppose, the CFO asked you to set up the decision tree to show its three most likely scenarios. The best case scenario happens with probability of 0.2, and produces three cash flows of $8..

  Use straight-line depreciation to zero over projects life

You are evaluating two different silicon wafer milling machines. The Techron I costs $249,000, has a three-year life, and has pretax operating costs of $66,000 per year. use straight-line depreciation to zero over the project’s life and assume a salv..

  In us dollar exchange rate

Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. Exxon is willing to pay $106 per barrel because they can sell the oil in advance to oil refineries. For..

  Call options value using the two-state stock price model

You are attempting to value a call option with an exercise price of $150 and one year to expiration. The underlying stock pays no dividends, its current price is $150, and you believe it has a 50% chance of increasing to $180 and a 50% chance of decr..

  Brick-and-mortar retail businesses

First, you have probably heard one character in a movie tell another that the three most important factors for determining the quality of a property are "location, location, location." It is true for businesses as well, particularly "brick-and-mortar..

  Cognitive and emotional models of consumer decision making

Compare and contrast the economic, passive, cognitive, and emotional models of consumer decision making. Using real products, explain how they use the consumer's decision making process to market their product. Use a different product for each model.

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