Problem 9.18 (Non constant Growth stock Valuation)Taussing Technologies Caporation (TTC) has beengrowing at a rate of 19% per year in recentyears. This some growth rate is expectedto last for another 2to 9n = 8%years, then declineCS dandercisThePoa) If D₂ = $3.00 and rs = 9%, what is TTC's?stock worth today!What is its expected dividend yield at this time,that is, during Year 1?What is its capital gains yields at this time,that is, during Year 1 ?to hrandc) What will TTC's dividend and capital gainsyields be once its penod of supernormal growthends? (Hint: These values will be the sameregardless of whether you examine the caseof 2 or 5 years of supermarmal growth; thecalculations are very easy.)Dividend yieldCapital gains yieldUTVEC

Dividend discount model refers to the stock valuation metric which takes the present value of the…

Answered: Problem 9.18 (Nonconstant Growth stock…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 21P

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Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
Taussig 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. a. If D₂ = $1.60, r = 10%, and g. - 6%, what is TIC's stock worth today? What are its expected dividend yield and capital gains yield at this time? 1. Find the price today. D₁ T. BL Year Dividend PV of dividends $1.7455+ 1.9041 $50.4595 $54.1091 - P. Dividend yield= Dividend yield- Dividend yield- $1.60 10.0% 20% $1.60 P₁ P₁ Cap. Gain yield-Expected return Cap. Gain yield Cap. Gain yield- P₁ D₁ $1.920 3.55% Cap. Gain yield Cap. Gain yield Cap. Gain yield 2. Find the expected dividend yield. Recall that the expected dividend yield is equal to the next expected annual dividend divided by the price at the beginning of the period. 20% 10.0% 6.45% - Short-run g; for Years 1-2 only. Long-run g; for Year 3 and all following years. - $1.92 3. Find the expected capital gains yield. The capital gains yield can be calculated by simply…
A corpus expected to pay a dividend of $1.25 per share at the end of the year (D1=$1.25). the stock sells for 27.50 per share and it's required return is 9.75 the dividend is expected to grow at some constant rate forever. what is the equilibrium expected growth rate?
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