What is the per- share price for this startups equity now

Assignment Help Finance Basics

Reference no: EM133615912

Problem: A start-up company plans to pay a $0.20 dividend in one year and grow that dividend at 10% per year for the following five years (up through the sixth dividend). Starting in the seventh year, the start-up will not pay any regular dividend. Instead, the start-up expects to be bought by a larger company at the end of the tenth year with 60% probability, and if so, there will be a liquidating dividend at that time that equals 2 million. Suppose that if the start-up is not sold to a larger company at the end of the tenth year, the start-up will be liquidated immediately and the liquidating dividend in this case will be either 1 million or 1.5 million, equally likely. Suppose the expected returns for the start-up are a constant 10% per year. Assuming there are 200,000 shares outstanding and this number of shares will not change in the future, what is the per- share price for this startup's equity now?

Reference no: EM133615912

Questions Cloud

How would the court resolve the breach of contract : Bob has decided not to exchange items with Bert, and keep the family heirloom. In this situation, how would the court resolve the breach of contract

Explain the four steps data verification : Explain the four steps data verification. explain how you would ethically respond to this scenario in the moment

Sample, population, and variable of interest : Take a single shipment of 2,400 bulbs, test 1,500 of them, and find 69 defective bulbs (4.6% of the bulbs they tested). a) Sample, Population, and Variable

What are some strategies you could suggest to monitor : What are some strategies you could suggest to monitor and manage the noise and disturbances in and around a venue that night?

What is the per- share price for this startups equity now : Assuming there are 200,000 shares outstanding and this number of shares will not change in future, what is the per- share price for this startup's equity now?

What is estimated current share price using dividend growth : What is the estimated current share price using the dividend growth model? Is the stock of ABC Co. is overpriced or underpriced?

Efficient processing and resolutions of the company : professor of Philippine State University for Obligation and Contracts. In December 2023, he availed an early retirement from the company to focus

Which of the four stocks should the cavalier fund pick : Which of the four stocks should the Cavalier Fund pick? Your answer may vary depending on the type of return or the model/methodology you choose.

Evaluate the impact of the organisations activities : Evaluate the impact of the organisations activities and choices on either the environment and/or society at large and identify which SDGs the organisation's

User Account

All Pages