Sustainable growth rate of earnings and dividends

Assignment Help Financial Management
Reference no: EM13850441

1. Trust Bankers just paid an annual dividend of $1.9 per share. The expected dividend growth rate is 6.7 percent, the discount rate is 12 percent, and the dividends will last for 8 more years. What is the value of the stock?

2. A share of stock will pay a dividend of $1.9 one year from now, with dividend growth of 5.3 percent thereafter. According to the constant dividend growth model, if the required return is 14.4 percent, what should the value of the stock be 4 years from now?

3. A share of stock just paid a dividend of $1.6, with an expected dividend growth of 5 percent forever. According to the constant perpetual growth model, if the required return is 14.7 percent, what should the value of the stock be 2 years from now?

4. If the return on equity for a firm is 14 percent and the retention ratio is 31 percent, what is the percentage sustainable growth rate of earnings and dividends?

5. The dividend for Weaver, Inc., is expected to grow at 16 percent for the next 4 years before leveling off at a 5.9 percent rate indefinitely. If the firm just paid a dividend of $1.05 and you require a return of 13 percent on the stock, what is the most you should pay per share?

 

6. Bill’s Bakery expects earnings per share of 5 = $5 next year. Current book value is $4 per share. The appropriate discount rate for Bill's Bakery is 12.9 percent. Calculate the share price for Bill's Bakery if earnings grow at 4.4 percent forever.

Reference no: EM13850441

Reviews

Write a Review

 

Financial Management Questions & Answers

  Explain collateral and conditions

The five Cs of credit are character, capacity, capital, collateral, and conditions. Review each of the four items mentioned in the article and then state which one of the Cs each would represent.

  Payment-interest-principal and loan balance

With a 30 year 9% loan of $200,000, how much of your yearly payment would be interest and how much would be principal for the first 4 years? Calculate the following : payment, interest, principal, loan balance(E.O.Y.), for each year.

  Calculate cash floor from refinery revenue in nominal dollar

A refinery made $1,000,000 last from selling 250,000 barrels for $4 each. In response to refinery prices increasing 3.5% each year, the refinery created a project that will increase production by 5% each year for five years. General inflation is expe..

  Calculate the equivalent annual cost of the facility

An oil company has installed an offshore production facility for $10 million. The annual maintenance cost of the facility is $60,000 per year for the first year, increasing by $10,000 per year for the next 9 years. In the 11th year, a major overhaul ..

  Risk-free rate of return and expected return on the market

The beta of M Simon Inc., stock is 1.3, whereas the risk-free rate of return is 0.08. If the expected return on the market is 0.14, then what is the expected return on M Simon Inc?

  The interest rate on one year treasury bonds

The interest rate on one year treasury bonds is 1%. the rate on 2 year t-bonds is .9%. the rate on 3 year t-bonds is 1.1%. Using the expectations theory compute the expected one year interest rate in the second year and the third year.

  Ebit and leverage

EBIT and Leverage. Kaelea, Inc., has no debt outstanding and a total market value of $125,000. Earnings before interest and taxes, EBIT, are projected to be $10,400 if economic conditions are normal. If there is strong expansion in the economy, then ..

  Compute the future cash flows

Compute Koda's weighted average cost of capital WACC and compute the future cash flows associated with the manufacturing of mobility vehicles and the net present value (NPV) of the project by filling in the blanks in the table below. Advise whether..

  What is maximum percentage loss you can incur option buyer

What is the maximum percentage loss you can incur as an option buyer?

  Which strategy best fits his objective

Ben owns 1,000 shares of stock that is selling for $40 per share. He wants to defer selling the stock until next January for tax reasons. He wants to find a strategy that guarantees he will have at least $40,000 in value next January. Which strategy ..

  Explain the accounting information for financial management

Write a 700- to 1,000-word paper identifying the specific cost accounting system an organization utilizes and how it uses the accounting information for financial management. Your paper must include the following

  What is his portfolios beta

Troy has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio’s beta?

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