Rapidly and currently needs to retain all of its earnings

Assignment Help Financial Management
Reference no: EM131316162

Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 20% per year - during Years 4 and 5; but after Year 5, growth should be a constant 4% per year. If the required return on Microtech is 14%, what is the value of the stock today? Round your answer to the nearest cent.

Reference no: EM131316162

Questions Cloud

What is the bond current market price : Madsen Motors's bonds have 10 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 12%; and the yield to maturity is 8%. What is the bond's current market price?
Provide a brief summary of the argument as to conclude essay : What kind of tone am I assuming for my argument? Provide a brief summary of the argument as to conclude the essay. Does my tone match the audience? (If not, consider changing your tone.).
How is volume charge density defined : How is Gauss' law for the electric field derived from Ampere's circuital law?
Determine a lower bound on the number of bins : According to the value of z(I) obtained before, determine whether the use of the BL heuristic allows one to obtain the minimum number of bins used.
Rapidly and currently needs to retain all of its earnings : Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from toda..
Provide brief profile of health-related organization : Provide a brief description of at least two community resources and at least two website resources for professionals and clients. Provide a brief profile of at least one health-related organization for the selected focus area
State gauss'' law for the magnetic field : Discuss briefly the application of Gauss' law for the electric field to determine the electric field due to charge distributions.
Why our preference for meat dishes is more important : PHI 208 - Ethics and Moral Reasoning Does he have a point here? Is there any reason that you can give why our preference for meat dishes is more important than an animal's interest in not being killed (and raised in captivity)?
The dividend is expected to grow at some constant rate g : Crisp Cookware's common stock is expected to pay a dividend of $2 a share at the end of this year (D1 = $2.00); its beta is 0.90; the risk-free rate is 5.2%; and the market risk premium is 6%. The dividend is expected to grow at some constant rate g,..

Reviews

Write a Review

Financial Management Questions & Answers

  Instead of a single benchmark pe ratio

If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock p..

  Dealership offers-special financing rate

You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's fina..

  Constant-growth model-what price should the stock sell

Constant-Growth Model. Gentleman Gym just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5% per year indefinitely. what price should the stock sell at? The discount rate is 15%. How would your a..

  Compute zero-volatility spread over the treasury spot rate

The market price of a 4-year 6% coupon non-Treasury issue is $102.4083. Calculate the current yield. Calculate the yield to maturity. Compute the zero-volatility spread over the Treasury spot rate.

  Exceed the required return on the less risky stock

Stock R has a beta of 1, Stock S has a beta of 0.65, the expected rate of return on an average stock is 13%, and the risk-free rate of return is 5%. By how much does the required return on the riskier stock exceed the required return on the less risk..

  Highly efficient market or a relatively inefficient market

As a knowledgeable investor, would you prefer to invest in a highly efficient market or a relatively inefficient market? Explain. As an inexperienced investor, would you prefer to invest in a highly efficient market or a relatively inefficient market..

  What was your real rate of return

You earned nominal returns of 12.31 percent on your investments for a time period when the risk-free rate was 7.3 percent and the inflation rate was 7.56 percent. What was your real rate of return?

  Fixed rate mortgage to buy new home

You need a 30-year, fixed rate mortgage to buy a new home for $200,000. Your mortgage bank will lend you the money at a 7.5% APR for this 360-month loan. However, you can only afford monthly payments of $1000, so you offer to pay off any remaining lo..

  What is the company market value debt–equity ratio

Frusciante, Inc. has 195,000 bonds outstanding. The bonds have a par value of $2,000, a coupon rate of 6.2 percent paid semiannually, and 8 years to maturity. The current YTM on the bonds is 6.4 percent. The company also has 9 million shares of stock..

  Treasury bill is generally used as the measure

The market return on the U.S. Treasury bill is generally used as the measure of the:

  What do you think is the main point of this video clip

What do you think is the main point of this video clip?- How might you change your process of investing in bonds as a result of watching this video clip?

  Create portfolio equally as risky as the market

You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: How much must you invest in Stock C?

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