Expect the growth rate of dividends

Assignment Help Financial Management
Reference no: EM131060454

If a firm just paid a dividend of $3.00 and you require a return of 13% for the risk perceived for the investment, what price would you pay for the stock if you expect the growth rate of dividends to be 10% for the next five years and then 5% thereafter? Please show work.

Reference no: EM131060454

Questions Cloud

Obtain the system of equations : Obtain the system of equations whose solutions give the pressure distribution in the reservoir at the end of 10 days. Use a time step of 5 days to generate the system of equations
PHILOSOPHY Essays : Write a 750-word paper about Thucydides versus Plato on the nature of the Good Life. Some have claimed that Thucydides is making empirical claims, whereas Plato is making normative claims. Is that true? Support your answer in your paper.
The lessors initial direct costs often are substantial : The lessor's initial direct costs often are substantial. What are initial direct costs? When are initial direct costs recognized in an operating lease? In a direct financing lease? In a sales-type lease? Why?
Major source of income for commercial banks : Which of the following is the major source of income for commercial banks (except "money center" commercial banks) ? Interest rate spread --- the difference between what banks earn from their assets (mainly interest) and what they pay on their liabil..
Expect the growth rate of dividends : If a firm just paid a dividend of $3.00 and you require a return of 13% for the risk perceived for the investment, what price would you pay for the stock if you expect the growth rate of dividends to be 10% for the next five years and then 5% thereaf..
The firms current earnings per share : If a stock is currently priced at $40 per share and the firm’s current earnings per share is $5, what price would you pay if you forecast new earnings per share to be $6.00 and you require a rate of return for the risk taken at 13%?
Expected dividend and earnings growth rate : What price would an investor requiring a 7% return pay for a stock which just declared a dividend of $5.00 if the expected dividend and earnings growth rate was estimated at 0%? Please show work.
Firm expects earnings and dividends to grow : Consider a stock which just paid a dividend of $2.50. If the firm expects earnings and dividends to grow at a rate of 4%, what price would you pay for the stock if you require a rate of return equal to 9%? Please show work.
Requires an initial investment : You are considering Project B that requires an initial investment of $70. The current present value of its cash flows is estimated to be $100 based on today’s market conditions. You can undertake Project B now or wait for one month to decide. The cur..

Reviews

Write a Review

Financial Management Questions & Answers

  Regression and inventories

Charlie's Cycles Inc. has $120 million in sales. The company expects that its sales will increase 7% this year. Charlie's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. What are you..

  Why are investors risk-averse and how can investors deal

Why are investors risk-averse and how can investors deal with different degrees of risk and what is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio?

  What is the current market price of these bonds

Jackson corporation's bonds have 12 years remaining to maturity. interest is paid annually, the bonds have a $1000 per value, and the coupon interest is 8%. the bonds have a yield to maturity of 9%. what is the current market price of these bonds?

  Minimum risk-based capital ratio requirement

In what way does a minimum risk-based capital ratio requirement battle the moral hazard problem in banking? How have banks tried to get around the provisions of the Glass-Steagall Act? How has the government responded?

  Mortgage with biweekly payments

Five years ago you took out a 15-year mortgage with biweekly payments (you make a payment every two weeks) to purchase your home. The interest rate is 7% per year and the biweekly payment is $800. What is the outstanding balance on the mortgage if th..

  Debt-to-total-assets ratios and interest rates on debt

Firm AB and Firm YZ are identical except for their debt-to-total-assets ratios (D/TAs) and interest rates on debt. Each has $200,000 in assets, $40,000 EBIT, and a 40 percent marginal tax rate. Firm AB has a D/TA ratio of 40 percent and pays 7.5 perc..

  Bank owns a high percentage of assets in bonds

Discuss what impact each of the following will have, in general, on EVE sensitivity to a change in interest rates. Consider two cases where rates rise sharply and fall sharply. a. Bank owns a high percentage of assets in bonds that are callable anyti..

  Compute the incremental income after taxes

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5% will prove to be..

  What is the investments net present value

Your firm is considering an investment that will cost $920,000 today. the investment will produce cash flows of $450,000 in year one, $270,000 in years 2 though 4, and $200,000 in year5. the discount rate that your firm uses for projects of this type..

  Assets with a relatively small dollar investment

The primary advantage of a holding company that permits the firm to control a large amount of assets with a relatively small dollar investment is known as

  What was its charge for depreciation and amortization

Talbot Enterprises recently reported an EBITDA of $9.0 million and net income of $2.7 million. It had $3.6 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Enter your answer in do..

  What are the relevant cash flows necessary to calculate NPV

The firm is evaluating a project that will add revenues of $325,000 annually for 5 years. The project has $225,000 of annual operating costs (including depreciation). The necessary equipment costs $350,000 and has a five-year life with straight line ..

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