Supernormal Growth (LO1) Duffs Co. is growing quickly. Dividends are expected to grow at a24% rate for the next three years, with the growth rate falling off to a constant 6% thereafter. If the required return is 11% and the company just paid a $1.90 dividend, what is the current share price?
Q: Summit Systems will pay a dividend of $1.61 this year. If you expect Summit's dividend to grow by…
A: Price per share is calculated using following equationPrice per share = Where, D1 is expected…
Q: The Sugar Cookie Company needs to raise $200 million for a project. If external financing is used,…
A: Floatation cost, in fund, relates to the costs caused by companies when raising capital through the…
Q: The bank offers you a 20 year mortgage for $200,000 at an interest rate of 8%. The term of the…
A: Mortgage loan=$200000Interest rate=r=8%Period=20 yearsFind out monthly payment.As per company…
Q: An investor is bullish in XYZ stock. He decides to buy on margin 1,000 shares at market price of…
A: Initial price=$50Maintenance margin=30%Initial margin=60%What should be margin call price.
Q: You are considering adding a new software title to those published by your highly successful…
A: Opportunity cost refers to the profit that is foregone from one project because of the selection of…
Q: Marigold Inc. issues $4,100,000 of 7% bonds due in 10 years with interest payable at year-end. The…
A: Bond price refers to the current market value of the bond. It can be determined by calculating the…
Q: A new grocery store cost $50 million in initial investment. It is estimated that the store will…
A: Net present value (NPV) is the difference between the current value of cash and the future worth of…
Q: In practice, a common way to value a share of stock when a company pays dividends to value the…
A: Price of the stock today is the PV of all future dividends and horizon value discounted at the…
Q: 809 eBook Carnes Cosmetics Co.'s stock price is $52, and it recently paid a $2.25 dividend. This…
A: The objective of the question is to find the constant growth rate of the stock after Year 3. This…
Q: Problem 2-10 In 2020, Natural Selection million of liabilities. Earnin million, the tax rate was 40…
A: Assets$512,000,000Liabilities$206,000,000EBIT$126,000,000Interest expenses$28,500,000Tax…
Q: Which of the following is not an advantage of a DCF valuation? Select all that apply.
A: DCF valuation - This method helps to find if an investment is really worth of it. It uses time value…
Q: If you deposit $750 at 12.41% annual interest compounded daily, how much money will be in the…
A: P = $750r =0.1241n =364t = 4A =?
Q: et's say you are going to retire at age 65. You will begin collecting checks from an annuity…
A: Annual payment=$4153.89Interest rate=r=6%Number of payment=36
Q: Pierre bought a 9% four-year bond with a par value of $100. The bond pays the coupon payments…
A: Present value = FV / (1+i)^twhereFV = Future value = principal amount = $100i = disocunt rate per…
Q: If you put on the futures position from 2 at a price of 0.043 $/peso, and if the peso appreciates…
A: A future contract is an understanding between two parties to purchase or offer an resource at a…
Q: • Joe & Dough Cafe is contemplating the purchase of a new $1,049,000 computer-based order entry…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Consider the following financial statement information for the Newk Corporation: Item Beginning…
A: Inventory=$12435 and $15615Account receivable=$6120 and $6287Cost of good sold=$79218Credit…
Q: An investor was afraid that he would become like King Lear in his retirement and beg hospitality…
A: The Interest rate on investment refers to the percentage return earned on an investment over a…
Q: According to the "Pecking Order Theory" of capital structure, what is the first preferred source of…
A: The Pecking order theory of capital structure tells that a company should prefer to finance…
Q: QUESTION 12 Consider a project that costs $219,000 today and is expected to earn $382,000 after 6…
A: The objective of this question is to calculate the internal rate of return (IRR) for a project. The…
Q: EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of…
A: EPS stands for Earnings Per Share. It is a financial metric that represents the portion of a…
Q: MacBurger just paid a dividend of $1.8 per share, and the stock currently sells for $35. If the…
A: The cost of equity is a part of the weighted average cost of capital.The weighted average cost of…
Q: Corporati onsidering Margo-class wettway sailboat. The selling price will be $41,000 per boat. The…
A: Break even point is where there is no loss and no profit and only all costs are covered and profit…
Q: Present value of bonds payable; premium Moss Co. issued $780,000 of four-year, 13% bonds, with…
A: To determine the present value of the bonds payable, we need to calculate the present value of the…
Q: New Business Ventures Inc. has an outstanding perpetual bond with a 13 percent coupon rate that can…
A: Bond price:The cost of a bond, a financial instrument used by investors to earn fixed or variable…
Q: The yield on the company's outstanding bonds is 6.8%; its tax rate is 40%; the next expected…
A: Weighted average cost of capital(WACC) is the average cost of capital, which can be calculated by…
Q: When purchasing a vehicle or obtaining a mortgage, you are most likely to get what kind of loan: O…
A: When purchasing a vehicle or obtaining a mortgage, the most common type of loan is an amortized loan…
Q: An investor is considering an investment that will pay $2,170 at the end of each year for the next…
A: Payment = p = $2170Time = t = 10 YearsRate of Return = r = 12%
Q: bond with a maturity date one year from now has a face value of $2,000 and a coupon rate of 4 %.…
A: Face Value (FV) = $2,000Coupon Rate (CR) = 4% or 0.04Price (P) = $1,873.87Years to Maturity (T) = 1…
Q: Congratulations, you just won the lottery! As the winner, you will receive payments of $2 million at…
A: The present value of an annuity due is the calculation used to determine the current value of a…
Q: ect that will increase net income by 18%. The company will sell shares ach less the underwriter's…
A: EPS is earning per share and income earned by shareholders and can be obtained by dividing net…
Q: (Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate of…
A: Nominal rate is the rate which has been stated in the loan documents or the financing arrangement…
Q: the operating expense ratio for the New Pacific Growth Fund is 1.05 percent, what is your total…
A: The rate of return determines the gain or loss on an investment in relation to its original cost and…
Q: The profit from the sale of a product is expected to increase at an annual rate of 8%. First-year…
A: We need to use future value formula to calculate equivalent future value after 8 years.FVn = Future…
Q: Your part-time job as Barista at the local coffee house has convinced you that you are ready to buy…
A: P0 = $45,000,Annual interest rate = 12%,Monthly interest rate (r) = 12% / 12 = 0.01,Total number of…
Q: Bar charts and risk Swan's Sportswear is considering bringing out a line of designer jeans.…
A: The objective of the question is to analyze the expected returns and riskiness of two potential…
Q: You and your spouse are in good health and have reasonably secure careers. Each of you makes about…
A: DINK refers to double income, no kids category of insured. In this time of insurance category, both…
Q: A friend asks to borrow $54 from you and in return will pay you $57 in one year. If your bank is…
A: Present value refers to the discounted value of future cash flows.future value is the compounded…
Q: A mutual fund has 500 shares of General Electric, currently trading at $16, and 500 shares of…
A: Net Asset Value (NAV) is a key financial metric used in the context of investment funds, including…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Portfolio return refers to the gain or loss on a portfolio of investments over a specific period,…
Q: Jake's Used Cars just sold you a clunker (you need it to get to class on time). You financed the…
A: Rate of interest on borrowing refers to the cost or fee that a borrower pays to a lender in exchange…
Q: A portfolio of assets has lower risk than holding one asset, but the same expected return and higher…
A: A portfolio typically refers to a collection or set of financial assets, investments, or projects…
Q: Suppose your company is expected to grow at a constant rate of 4 percent long into the future. In…
A: Constant growth rate (g) = 4%Required rate of return = Dividend Yield + Constant growth rateRequired…
Q: Laurel's Lawn Care Limited has a new mower line that can generate revenues of $135,000 per year.…
A: Operating cash flow is the amount received by the business by performing their core business…
Q: XYZ Corporation imports goods from China with a total invoice value of $10,000,000. The exchange…
A: Foreign exchange rates represent the relative value of one currency in terms of the another. These…
Q: The $9.4M lottery that you just won actually pays ($9.4M divided by 40) per year for 40 years. If…
A: Present Value of Ordinary Annuity refers to the concept which dictates the discounted value of a sum…
Q: Keep the Highest/2 f new common stock represent the fees that firms pay to investment bankers to…
A: Price of the stock (P0) = $22.35Next dividend (D1) = $2.45Growth rate (g) = 0.087 or 8.70%Flotation…
Q: The following table shows the expenses and payments on a credit card for 3 months, starting with an…
A: Balance = Previous Month's Balance - Payment + Expenses + Interest = Closing BalanceThe table is…
Q: An investment requires a total return that comprises: a real rate of return and compensation for…
A: Total return in case of an investment comprises of a real rate of return, compensation for…
Q: Your company is planning to borrow $1 million on a 5-year, 11%, annual payment, fully amortized term…
A: Amortization is the systematic and regular repayment of loan and its interest. Each repayment…
Supernormal Growth (LO1) Duffs Co. is growing quickly. Dividends are expected to grow at a24% rate
for the next three years, with the growth rate falling off to a constant 6% thereafter. If the required return
is 11% and the company just paid a $1.90 dividend, what is the current share price?
Step by step
Solved in 3 steps with 1 images
- Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?Company Z earnings and dividends per share will grow indefinitely by 4.1% a year if next year's dividend is $9.0. The market capitalization rate is 13.9%. If Company Z were to distribute all its earnings, it could maintain a level dividend stream of $11.3 a share. How much is the market actually paying per share for growth opportunities? A. -11.6 B. 33.8 C. 15.0 D. 10.5Supernormal Growth Synovec Corp. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling off to a constant 4.5 percent, thereafter. If the required return is 10.5 percent and the company just paid a dividend of $3.15, what is the current share price?
- Synovec Company is growing quickly. Dividends are expected to grow at a rate of 26 percent for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 16 percent and the company just paid a $1.60 dividend, what is the current share price? Multiple Choice O $34.02 O$32.69 O$29.54 O$33.36 $31.31Taussig 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…Nonconstant Growth. Tattletale News Corp. has been growing at a rate of 20% per year, and you expect this growth rate in earnings and dividends to continue for another three years. (LO7-2) a. If the last dividend paid was $2, what will the next dividend be? b. If the discount rate is 15% and the steady growth rate after three years is 4%, what should the stock price be today?
- Kramerica Industries paid $3.00 per share in dividends yesterday. Its dividends are expected to grow steadily at 4% per year. If the required return is 8.4%, what is the current price (PO)? $70.10 $69.24 $68.52 Ⓒ$70.91Conroy Consulting Corporation (CCC) has a current dividend of D0 = $1.00. Shareholders require a 14% rate of return. Although the dividend has been growing at a rate of 25% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 25%). After Year 2, the growth rate will stabilize at gL = 8%. /!\ Be mindful of rounding errors! Rounding intermediary calculations may lead to slight errors. What is CCC's stock worth today?Do not round intermediate calculations. Round your answer to the nearest cent. Answer What is the expected stock price at Year 1?Do not round intermediate calculations. Round your answer to the nearest cent. Answer What is the Year 1 expected dividend yield? Do not round intermediate calculations. Round your answer to two decimal places. Answer What is the Year 1 capital gain yield? Do not round intermediate calculations. Round your answer to two decimal places. Answer What is the Year 1…M Company's last dividend was $1.25 (D0). The dividend growth rate is expected to be constant at 15.0% for 2 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (rs) is 11%, what is its D3 (Dividend at the end of year 3) ? 1.75 2.02 2.12 2.32
- Suppose that a company's most recent dividends per share paid upon the last year's net income was $1.6 . The share price of the company is fairly valued in the market at $10 . The expected dividend growth rate is 2% in perpetuity. Given that the risk-free rate is 3% and market risk premium is 10%, what happens to the share prices when the whole market increases by 10%? a) increase by 15.32%b) increase by 15.00%c) increase by 11.79%d) increase by 21.89%e) other12. Trend-line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $5 per share. a. If the market expects a 10% rate of return on Trend-line, at what price must it be selling? b. If Trend-line's earnings per share will be $8, what part of Trend-line's value is due to assets in place, and what part to growth opportunities?2. Huang Company's last dividend was P1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return is 11%, what is its current stock price? a. P30.57 b. P33.50 c. P31.52 d. P32.49