Expected to grow at a constant rate

Assignment Help Financial Management
Reference no: EM131059823

Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 25% the following year, after which growth should return to the 6% industry average. If the last dividend paid (D0) was $2.25, what is the value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations.

Reference no: EM131059823

Questions Cloud

Analysis of the ethical concerns raised by the situation : The paper must identify which ethical outlook as applied to this particular situation will result in the best legal outcome for the business.
High-voltage transmission line : A high-voltage transmission line is made of bare wire; it is not insulated. Assume that the wire is 100 km long, has a resistance of 7.0 Ω, and carries 200 A.
Factor analysis of the vehicle fatalities data : Carry out a factor analysis of the vehicle fatalities data of Table 7.6 by replacing Provinces by years, that is, by treating the years as variables. Interpret the loadings and scores in terms of vehicle fatalities. Is any additional insight provi..
Determining the period of the oscillation : A spring constant 400N/m is hung from a hook. A fish is hung from the spring and is pulled down 6.5 cm past its equilibrium position, then released to oscillate in simple harmonic motion. If the mass of the fish is 1760 g, what is the period of it..
Expected to grow at a constant rate : Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
Kelvin temperature doubles : A monatomic ideal gas is contained within a perfectly insulated cylinder that is fitted with a movable piston. The initial pressure of the gas is 1.50 X 105 Pa. The piston is pushed so as to compress the gas with the result that the Kelvin tempera..
What is the break-even rate in case : Acme has branched out to rentals of office furniture to start-up companies. Consider a $4,600 desk. Desks last for six years and can be depreciated on a five-year MACRS schedule. Assume administrative costs drop to $360 per year. The company has just..
What is the amount ms waterman will receive when the t-bill : Sandra Waterman purchased a 52-week, $3,200 T-bill issued by the U.S. Treasury. The purchase price was $3,189. What is the amount of the discount? What is the amount Ms. Waterman will receive when the T-bill matures? What is the current yield for the..
Infer approximate climatological conditions : Core samples taken from ocean floors are at times analyzed for plankton content in order to infer approximate climatological conditions which existed on earth. Since many species coexist at different times (core depths), their abundance is general..

Reviews

Write a Review

Financial Management Questions & Answers

  Receive annual incremental income after taxes

We expect that we can receive annual incremental income after taxes of $25,000, including an adjustment for uncollectible accounts. What is the maximum commitment to A/R that we should be willing to assume if our firm's minimum required after-tax ret..

  What should be the exchange rate at the end of the year

Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,500,000. The spot exchange rate is ¥119.50/$. The forecast rate of inflation in the United States is 1.25% per year and is 0.0% per year in Japan. What was the export price for ..

  Rather issue noncallable bonds than callable bonds

If a 10-year, $1,000 par, 10% coupon bond were issued at par, and if interest rates then dropped to the point where rd = YTM = 5%, we could be sure that the bond would sell at a premium above its $1,000 par value. Other things held constant, a corpor..

  Use as the annual sales figure when evaluating this project

Winnebagel Corp. currently sells 29,000 motor homes per year at $78,000 each and 8,000 luxury motor coaches per year at $120,000 each. The company wants to introduce a new portable camper to fill out its product line; What is the amount to use as the..

  Indifferent between accepting the project and rejecting it

A project that provides annual cash flows of $2,300 for nine years costs $9,500 today. Requirement 1: At a required return of 11 percent, what is the NPV of the project? At what discount rate would you be indifferent between accepting the project and..

  Suppose that an investor approached stanley about buying

Track Software paid $5,000 in dividends in 2015. Suppose that an investor approached Stanley about buying 100% of his firm. If this investor believed that by owning the company he could extract $5,000 per year in cash from the company in perpetuity, ..

  What rate should it use to discount the projects cash flows

Bluefield Corporation has 5 million shares of common stock outstanding, 750,000 shares of 7 percent $100 par preferred common stock outstanding, and 250,000 11% coupon bonds outstanding, par value 1,000 each, interest paid semiannually. What is the f..

  Inventory assuming that all sales are on credit

The Fischer Sport Store has assets of $525,300, costs of goods sold of $305,000, accounts receivable of $57,600, and inventory of $109,100. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

  About the retirement

You are 30 years old today. You want to retire at age 60. You want to have 2,700,000 at retirement. Realistically, you know that the most that you can save from you 31st birthday unitl your 50th is 7250 per year (you only save on your birthdays!) How..

  Find the annual withdrawal

Find the Annual withdrawal

  Managers want to estimate common stock value

Berth Cargo Corporation is considering going public. Managers want to estimate common stock value. The firm’s weighted average cost of capital is 11%, and it has $1.5 million of debt at market value, and $400,000 of preferred stock also at market val..

  Investor the same cash flow payoff in future years

Consider two firms A and B that are identical in all respects except capital structure. Firm A has $160 million in equity outstanding and $40 million in bonds outstanding. Firm B has $200 million in equity outstanding and $0 million in bonds outstand..

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