Determine the long-run earnings growth rate

Assignment Help Corporate Finance
Reference no: EM13197550

Mag-Lev Wind Turbines (MLWT) expects to have earnings for the fiscal year ending (in six years) on March 22, 2019 of $5.00 per share. At this time, MLWT is expected to pay its first- ever dividend of $3.00 per share. Beginning with the 2019 fiscal year end, and continuing in perpetuity, MLWT is expected to reinvest a constant fraction of earnings in the business at a constant return on equity ROE of 15 percent. Assuming that on March 22, 2018 (one year prior to the first dividend payment) the stock of MLWT is expected to sell at a forward- looking price to earnings ratio of 12.5, determine:

a. the long-run earnings growth rate for MLWT 

b. the current (date 0) share price for MLWT 

c. the current (date 0) share price for MLWT

Reference no: EM13197550

Questions Cloud

Discuss the relationship between healthcare quality and cost : Discuss the relationship between healthcare quality, access, and costs and how these three influence one another in our healthcare system. Also, identify factors in our system that may have an impact on these concepts.
Explain the profit – maximizing output and price : The monopolist has a constant marginal and average total cost of $50 per unit. Find the monopolist’s profit – maximizing output and price.
Determine whether the firm should purchase the centrifuge : Assuming that Valley Proteins has a tax rate of 30 percent and that their opportunity cost of capital (required return) is 10 percent, determine whether the firm should purchase the centrifuge from Harburg-Freudenberger or the Bird Machine Co. cent..
Determine the demand for gmc cars for the coming year : GMC wants to determine its production plan at each plant in the coming year. Based on the previous data, formulate a mixed integer programming model for solving GMC's production planning-capacity expansion problem for the coming year.
Determine the long-run earnings growth rate : Determine the long-run earnings growth rate for MLWT  and the current (date 0) share price for MLWT
Tips to maximize our average grade : Brian is taking three courses this semester: economics, statistics, and finance. He has decided to spend 19 hours per week studying his objective is to maximize his average grade.
Determine the prices of municipal bonds : Determine the prices of municipal bonds by discounting their expected payoffs using the discount rate for risk-free municipal bonds, determine the promised yield to maturity for Rio Linda's outstanding issue of 4.5 percent coupon bonds.
Determine the market price for the bonds : Determine the market price for the bonds as of March 22, 2013 and determine the rate of return that would have been earned by an investor who purchased the PIK bonds on March 22, 2013 and sold the PIK bonds on March 22, 2014.
How does each theory affect the views of society : How does each theory apply to the family. What are the similarities and the differences. How does each theory affect the views of the individual who is part of the family. How does each theory affect the approach to social change within the family..

Reviews

Write a Review

Corporate Finance Questions & Answers

  How would the accounts change

If Trans World stock currently sells for $42 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

  Calculate monthly payment for the loan

You get small business loan in the amount of 50,000 is the value you require to buy the restaurant location. After researching banks to find the best interest rate.

  Find the company''s current stock price

Calculation of required rate of return and valuation of current stock price - Find the company's current stock price?

  Evaluating the two companies financial statements

A corporation has recently met with auditors to discuss scope of year's audit. Talk about the reason for an integrated audit and give a recent failure of a corporate governance.

  Operating cash flow used in capital budgeting

Why would you expect both NPV and IRR to support the same conclusion to accept or reject the project and Why is operating cash flow used in capital budgeting and not net income?

  Prepare the necessary closing entries in proper journal form

Preparation of necessary closing entries form the given adjusting transactions -  prepare the necessary closing entries in proper journal form

  Prepare a journal entry to record depletion during the year

Salter Mining Company purchased the Northern Tier Mine for $21 million cash. The mine was estimated to contain 2.5 million tons of ore and to have a residual value of $1 million. During the first year of mining operations at the Northern Tier Mine..

  Examination of differences among revenue, costs & cash flows

Match the following finance terms with the solutions below. If none fit, indicate it.

  Build a balanced scorecard for the unit

Develop three specific objectives within each of the four perspectives for the unit. Each objective should have at least one quantified target metric associated with it.

  Role the government plays in personal finance

Explain the role the government plays in personal finance and explain the role of government assistance in personal finance (describe what type of assistance is available).

  Cost of capital from the common equity

A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 6.7% per year forever. The price of the firm's common stock is now $27.36.

  Dispose of toxic elements from recycled computers

Redo your analysis for a scenario in which CT incurs a cost of $0.20 per unit to dispose of the toxic elements from the recycled computers. What is your recommendation under these circumstances?

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