Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year. Term Dividends one year from now (D₁) Horizon value (P₁) Intrinsic value of Portman's stock Value The risk-free rate (TRF) is 5.00%, the market risk premium (RPM) is 6.00%, and Portman's beta is 1.70. Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? O 10.77% 11.20% 12.41% 8.96% Now let's apply the results of your calculations to the following situation:
Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year. Term Dividends one year from now (D₁) Horizon value (P₁) Intrinsic value of Portman's stock Value The risk-free rate (TRF) is 5.00%, the market risk premium (RPM) is 6.00%, and Portman's beta is 1.70. Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? O 10.77% 11.20% 12.41% 8.96% Now let's apply the results of your calculations to the following situation:
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 21P
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Transcribed Image Text:Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very
profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though,
Portman's dividend is expected to grow at a constant rate of 4.00% per year.
Term
Dividends one year from now (D1)
Horizon value (P₁)
Intrinsic value of Portman's stock
Value
10.77%
11.20%
12.41%
8.96%
The risk-free rate (TRF) is 5.00%, the market risk
premium (RPM) is 6.00%, and Portman's beta is 1.70.
Assuming that the market is in equilibrium, use the
information just given to complete the table.
What is the expected dividend yield for Portman's stock today?
Now let's apply the results of your calculations to the following situation:
Transcribed Image Text:Portman has 600,000 shares outstanding, and Judy Davis, an investor, holds 9,000 shares at the current price
(computed above). Suppose Portman is considering issuing 75,000 new shares at a price of $17.48 per share. If the
new shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on a
per-share basis?
O $0.71 per share
O $0.42 per share
$0.29 per share
O $0.34 per share
Thus, Judy's investment will be diluted, and Judy will experience a total
of
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