Tesla Inc (TSLA) has been growing at a rate of 33% per year in recent years. This same supernormal growth rate is expected to last for another 4 years, during which it will not pay dividend. It will start paying a dividend of $5 a share in 5th year. After this, earnings and dividends are expected to grow at a 4 percent annual rate indefinitely. Investors currently require a rate of return of 9 percent. What should be the current market price per share of its stock? O 67.29 O 70.84 77.92 O 63.75 O 60.21
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- Emerald City Corporation (ECC) is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect ECC to begin paying a dividend of $2.00 three years from today. The dividend should grow rapidly: at a rate of 30% per year during years 4 and 5. After Year 5, growth should be a constant 5% per year forever. If the required return on ECC is 9%, what is the value of the stock today?Macro Systems just paid an annual dividend of $0.20 per share. Its dividend is expected to double for the next four years (D1 through D4), after which it will grow at a more modest pace of 2% per year. If the required return is 12%, what is the current price?Trend-Line Incorporated has been growing at a rate of 7% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $6 per share. If the market expects a 12% rate of return on Trend-Line, at what price must it be selling? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to assets in place? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to growth opportunities?
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