What is expected dividend yield and capital gains yield now

Assignment Help Financial Management

Reference no: EM131308166

Top Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years. The company has just paid a dividend of $1.60 and the cost of equity is 10% and the normal growth rate after 2 years is equal to 6%.

Required:

a. Calculate the expected dividends for the coming 3 years.

b. What is the share price now? What is the share price one year later if the cost of equity remains at 10%?

c. What is the expected dividend yield and capital gains yield now?

d. What will be TTC‘s dividend yield and capital gains yield once its period of supernormal growth ends?

e. Now assume that TTC's period of supernormal growth is to last anther 5 years rather than 2 years. How would this affect its price, dividend yield, and capital gains yield? Answer in words only.

Reference no: EM131308166

Questions Cloud

What are the terminal cash flows and net cash flows : The Cosmo K Manufacturing Group currently has sales of $1,400,000 per year. It is considering the addition of a new office machine, which will not result in any new sales but will save the company $105,500 before taxes per year over its 5-year useful..

Loan by making equal quarterly payments : Holly just borrowed 30,767 dollars from the bank. She plans to repay this loan by making equal quarterly payments for 6 years. If the interest rate on the loan is 15.36 percent per year and she makes her first quarterly payment in 3 months from today..

Dollars in investment account and retirement account : Tim wants to have 257,897 dollars in his investment account in 7 years from today. He expects to earn a return of 9.57 percent per year in that account. Tim plans to make regular, equal savings contributions of X per year to his account for 7 years, ..

Aggressive corporation has a proposal for a project : Aggressive Corporation has a proposal for a project that will have the following cash flows in the next three years. The board of Aggressive will not approve any projects that will pay back in more than 3 years. What is the payback period and the dis..

What is expected dividend yield and capital gains yield now : Top Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years. Calculate the expected dividends for the coming 3 years. What is the share price now? What i..

Target capital structure of debt and preferred stock : Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 35%, rd = 7%, rps = 6.5%, and rs = 11%. If Shi has a target capital structure of 30% debt, 5% preferre..

Calculate the optimal size of the milk storage tank : Root Cream Company plans to buy 20,000 gallons of milk annually. It will buy the milk at $2.45 a gallon, plus $30 charge per delivery. The cost of capital for Root is 10%. The storage cost of the milk, at the average inventory level, is 2 cents per g..

What should you be willing to pay today for the annuity : An insurance company offers you an annuity of $36,000 per year for the next 15 years. They claim your return on the annuity is 13%. What should you be willing to pay today for the annuity?

Higher or lower interest rate : You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already dec..

User Account

All Pages