Holdings and reinvest the proceeds elsewhere

Assignment Help Financial Management
Reference no: EM131186459

You own the stock of SageTech and its current price is $55.00/share. It pays no dividend today. Based on your own research, you expect SageTech to pay its first dividend of $3.80/share at the end of Years 1 and 2 (12 and 24 months from now). Given its performance outlook, you further expect the Board of SageTech to increase the Year 3 dividend by 10% to $4.18; and then to increase it by 3% annually for the next 5 years (end of years 4 through 8); after which it will grow by 1.5% annually forever.

You enjoy a number of investment alternatives that will, on average, provide you with a 9.0% annual return. In light of this, should you buy more SageTech stock at the current $55 price; or should you sell all your current SageTech holdings and reinvest the proceeds elsewhere?

Reference no: EM131186459

Questions Cloud

Make dividend payment that provides a dividend yield : Tetrad, Inc. is scheduled to make a dividend payment that provides a dividend yield of 6.5%, and this dividend amount is expected to grow in perpetuity at 3% annually. If the stock is selling for $66.00/share, what return do investors anticipate?
Operates in mature industry as cash cow : Tabula, Inc. operates in a mature industry as a “cash cow” and thus pays out all of its earnings as dividends. But it has recently developed a new technology that could provide good growth potential, allowing the firm to earn an 8% return on retained..
Internet search engine : Use the key word ECONOMIC NEWS in an Internet search engine (Google, Bing etc.) to locate online news sources such as CNN News, the NYTimes, Chicago Tribune, Forbes, US News and World Report, or any of the various other nationally recognized news ..
How does the sow affect administration of the contract : Why is it essential to differentiate between the primary objective and subordinate objectives while developing the SOW? How does the SOW affect administration of the contract? Describe the balancing act required when developing the SOW. Give two exam..
Holdings and reinvest the proceeds elsewhere : You own the stock of SageTech and its current price is $55.00/share. It pays no dividend today. Based on your own research, you expect SageTech to pay its first dividend of $3.80/share at the end of Years 1 and 2 (12 and 24 months from now).  In ligh..
How many calories can be obtained from one average banana : how many calories can be obtained from one average banana
Explain a modern day religious or political center : Identify a modern day religious or political center that these call to mind. Compare Angkor in southeast Asia with the city of Benin in West Africa, and discuss differences, similarities, and religious ideals in each place.
What is the corporations operating cash flow for the year : During the current year, a firm had sales of 1,500,000; cost of goods sold of 1,245,000 selling and administration expenses of 187,500; depreciation of 217,500; and, interest expense of 97,500. The tax rate is 35%. What is the corporation’s operating..
Why phenyl hydrazine react as reducing agent : Why phenyl hydrazine react as reducing agent in the reaction of phenylhydrazine with glucose

Reviews

Write a Review

 

Financial Management Questions & Answers

  Define the term constraints and give an example

Define the term constraints and give an example. For a manufacture what product should be made first when resource constraints exist?

  Income statement related to this option grant

Tanner Inc. reports 2,858,000 stock options granted during fiscal 2014 at a weighted-average fair-value of $15.40. The average vesting period for these options is four years. Tanner should record a $44,013,200 expense on its income statement related ..

  The property is derelict and must be destroyed at a cost

A building is available for sale for $5 million. The property is derelict and must be destroyed at a cost of $ 3 million. The State of Florida wants the property to building an inner city detention center and has an allocated budget for the land of $..

  Determine the irr of each investment

Investment A has the following cash flows: 200,200,300,200 200 Investment B has the following cash flows: 300,300,300,300,300 Both investments have a cost of 350 initially. Indicate which registers, financial or cash flow, can be used to determine th..

  Record entries and build the financial statements

Create a chart of T-Accounts and post each journal entry to the appropriate accounts.

  Weighing the merits of leasing the equipment or purchasing

Stanley Inc. must purchase $6,000,000 worth of service equipment and is weighing the merits of leasing the equipment or purchasing. The company has a zero tax rate due to tax loss carry-forwards, and is considering a 5-year, bank loan to finance the ..

  Calculate the covariance between the returns of stock

Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.11 and 0.16, respective..

  Calculate the sustainable growth rate for webb

You have located the following information on Webb's Heating & Air Conditioning: debt ratio is 59 percent, capital intensity is 1.30 times, profit margin is 13.0 percent, and the dividend payout is 30.00 percent. Calculate the sustainable growth rate..

  Determine financial ratios-compare them to industry standard

Analyze Ford Motor Company’s balance sheet from its 2012 Annual Report. In your analysis, you must determine the financial ratios and compare them to industry standards.

  Which loan has the lowest all in cost

The Eurobond carries a lower annual coupon of 4.25%, but the total costs of issuing the bond runs to 1.25% of the issue size. Which loan has the lowest all-in cost?

  Two mutually exclusive projects-cash flow

Romboski, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 57,000 −$ 57,000 1 33,000 20,300 2 27,000 24,300 3 19,500 29,000 4 13,400 25,300 Requirement 1: (a) What is the IRR for each of these p..

  Company announced that future dividends will be increasing

Ace Hardware paid an annual dividend of $1.25 per share last month. Today, the company announced that future dividends will be increasing by 2.5% annually. If you require a 11% annual rate of return, how much are you willing to pay to purchase one sh..

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