By how much does its value exceed what it would be

Assignment Help Financial Management
Reference no: EM131996547

The stock of Nogro Corporation is currently selling for $16 per share. Earnings per share in the coming year are expected to be $2.60. The company has a policy of paying out 40% of its earnings each year in dividends.

The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.

a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Rate of return

b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?

Reference no: EM131996547

Questions Cloud

Calculate the value of a two-month european call option : Given the risk-free rate is 6% per annum with continuous compounding, what is the value of a two-month European call option with a strike price of $770?
What is the probability that two randomly selected tulip : A bag of 32 tulip bulbs contains 11 red tulip? bulbs, 11 yellow tulip? bulbs, and 10 purple tulip bulbs.
What will be its stock price following the stock repurchase : Gamma Industries has net income of $600,000, and it has 1,840,000 shares of common stock outstanding. The company's stock currently trades at $62 a share.
Compute the mean and variance : Suppose Xt follows a random walk model (i.e Xt = Xt-1 + et ) et ~ i.i.d (0.5, 1)
By how much does its value exceed what it would be : The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.
Determining the gross requirements : Could someone please explain how to do the following, and show their work so that I can learn it?
How much would an investor be willing to pay for this stock : Analysts expect dividends to grow at a rate of 20% for three years, 15% for the following two years, and then slow to a constant rate of 10% thereafter.
What will a beta book compute as the adjusted beta : Suppose that you estimate the following regression describing the evolution of beta over time.
What must the market risk of the stock be : If Treasury bills yield 5% and investors believe that the stock offers a satisfactory expected return, what must the market risk of the stock be?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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