The new cash flows., Finance Basics

Tank Industries Washers decides to pay the following dividends over the next four years: $2.50, $3.20, $4.75 and $5.20 respectively (starting at time 1).

a.    After year 4, the firm decides a constant growth rate of 3%.  If investors needs 11%, what is the present share price?

b.    The CEO, main Payne, has identified various new investment opportunities.  He is trying to convince investors to back his strategy.  He would need to keep the dividends at $2.50 each year for the next four years. After year 4, the growth rate would be 10% forever.  Based on the increased risk, the other investors increase the needed return to 15%.  Should they back his strategy? Hint: Re-estimate the present price based on the new cash flows.

Posted Date: 3/18/2013 8:57:18 AM | Location : United States







Related Discussions:- The new cash flows., Assignment Help, Ask Question on The new cash flows., Get Answer, Expert's Help, The new cash flows. Discussions

Write discussion on The new cash flows.
Your posts are moderated
Related Questions
What is the Execution of order in the Stock Exchange When broker receives the margin money and is clear about the order received by him, he puts details in the 'order book'.


A Ltd.'s share gives a return of 20% and B Ltd.'s share gives 32% return. Mr. Gotha invested 25% in A Ltd.'s share and 75% of B Ltd.'s shares. What would be the expected return of

The following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will

Explain about the Internal Rate of Return Internal rate of return (IRR) is the rate of discount that makes the present value of all the revenues (cash flows) from the invest

Head Office and Branch or Subsidiary MNC has diverse operations set up in dissimilar geographical locations. The HQ acts like the principal and the subsidiary like an agent he

Assume the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are the relevant data estimates. Variable costs $ 5.00 Annual fixed c

Investment Analysis Any type of company will invest finance for the sake of deriving a return that is useful for four main purposes as: 1. To reward the owners or shareholder

Q1.  A local delivery company has purchased a delivery truck for $15,000.  The truck will be depreciated under MACRS as a five year property.  The trucks market value (salvage valu

Business Activity Cycle The interest rates also depend on business cycles as above. Because the economy moves in the four (4) business cycles, such interest rates will shift l