6. DIVIDEND VALUATION MODEL (2) The Advantage Food Corporation paid a dividend of $1.36 last year and its stock is currently selling for $33.60 per share. The company is expected to grow at 7.5% indefinitely. (a) Estimate the firm's cost of retained earnings. ((b) if the firm has to raise capital beyond what was available from retained earnings, what would be its cost of equity from new stock if flotation costs were 12% of money raised?

Assume Highline Company has just paid an annual dividend of $1.05. Analysts are predicting an 10.5% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.1% per year. If Highline's equity cost of capital is 7.6% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of Highline's stock is $ (Round to the nearest cent.)

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Management action and stock value REH Corporation's most recent dividend was $2.78 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 9% and lower the required return to 11%. c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 7% and raise the required return to 16%. d. Merge with another firm, which will reduce the growth rate to 1% and raise the required return to 19%. e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 9% and increase the required return to 16%. a. If the firm does nothing that will leave the key…

Assume Highline Company has just paid an annual dividend of $1.04. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.5% per year. If Highline's equity cost of capital is 8.1% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell? The value of Highline's stock is $. (Roun to the nearest cent.) Assume Highline Company has just paid an annual dividend of $1.04. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.5% per year. If Highline's equity cost of capital is 8.1% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of Highline's stock is $…

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Management action and stock value REH Corporation's most recent dividend was $1.79 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 7% and lower the required return to 13%. c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 9% and raise the required return to 16%. d. Merge with another firm, which will reduce the growth rate to 2% and raise the required return to 16%. e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 8% and increase the required return to 16%. ... a. If the firm does nothing that will leave the key…