PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 4, Problem 21PS
Growth opportunities If company Z (see Problem 10) were to distribute all its earnings, it could maintain a level dividend stream of $15 a share. How much is the market actually paying per share for growth opportunities?
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Chapter 4 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 4 - Stock markets True or false? a. The bid price is...Ch. 4 - Stock quotes a. I would like to sell 1000 shares...Ch. 4 - Stock quotes Here is a small part of the order...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Valuation by comparables Look up P/E and P/B...Ch. 4 - Dividend discount model True or false? a. All...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...
Ch. 4 - Prob. 11PSCh. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Prob. 13PSCh. 4 - Cost of equity capital Under what conditions does...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Two-stage DCF model Company Z-prime is like Z in...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - Growth opportunities If company Z (see Problem 10)...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Valuing a business Permian Partners (PP) produces...Ch. 4 - Valuing a business Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing a business Phoenix Corp. faltered in the...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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- Assuming the company continues its current growth rate, what is the value per share of the company’s stock?arrow_forwardConsider the following security: Brous Metalworks Earnings Per Share, Time = 0 $2.00 Dividend Payout Rate 0.250 Return on Equity 0.150 Market Capitalization Rate 0.125 Required: Using the information in the tables above, please calculate the sustainable growth rate, dividends per share, and intrinsic value per share. Then solve for the present value of growth opportunities. (Use cells A5 to B8 from the given information to complete this question.) Brous Metalworks Sustainable Growth Rate Dividends per share (Next Year) Intrinsic Value No-Growth Value Per Share Present Value of Growth Opportunities (PVGO)arrow_forwardA firm can increase its growth rate (g) by 1) Increasing its dividend retention rate 2) Increase its ROE 3) Increase its required return 4) a and b 5) all the abovearrow_forward
- Sustainable Growth Rate The Raindrop Company has an ROE of 12.1 percent and a payout ratio of 25 percent.a. What is the company’s sustainable growth rate?b. Can the company’s actual growth rate be different from its sustainable growth rate? Why or why not?c. How can the company increase its sustainable growth rate?arrow_forwarda. Determine average annual dividend growth rate over the past 5 years. Using that growth rate, what dividend would you expect the company to pay next year? b. Determine the net proceeds, N, that the firm will actually receive. c. Using the constant-growth valuation model, determine the required return on the company's stock, rg, which should equal the cost of retained earnings, r,. d. Using the constant-growth valuation model, determine the cost of new common stock, r,.arrow_forwardA firm wants a sustainable growth rate of 2.73 percent while maintaining a dividend payout ratio of 39 percent and a profit margin of 6 percent. The firm has a capital intensity ratio of 2. What is the debt–equity ratio that is required to achieve the firm's desired rate of growth?arrow_forward
- H3. A firm wishes to maintain an sustainable growth rate of 9 percent and a dividend payout ratio of 64 percent. The ratio of total assets to sales is constant at 0.9, and the profit margin is 10.1 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be? Please show proper step by step calculationarrow_forwardWhat proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8% and the firm's ROE is 20%?arrow_forwardCompany 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. 10.5arrow_forward
- A firm wants a sustainable growth rate of 3.73 percent while maintaining a dividend payout ratio of 39 percent and a profit margin of 8 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the firm's desired rate of growth?arrow_forward1. What is the Internal Growth rate for Cafes Richard ? What is the sustainable growth rate for Cafes Richard ? If sales grow at SGR, how much External Financing will be needed for the year 2021 using Percentage of sales approach, assuming that the firm is operating at full capacity? Interest expense and tax rate will not change. Calculate the tax rate (hint: tax rate = tax/taxable income). Please create pro forma statements as well. What's the impact in the new Debt to equity ratio, if any?arrow_forwardI need detailed explanation for the following question If a firm bases its growth projection on the rate of sustainable growth, shows positive net income, and has a dividend payout ratio of 30 percent, then the: A. fixed assets will have to increase at the same rate, even if the firm is currently operating at only 78 percent of capacity.B. number of common shares outstanding will increase at the same rate of growth.C. debt-equity ratio will have to increase.D. debt-equity ratio will remain constant while retained earnings increase.E. fixed assets, the debt-equity ratio, and number of common shares outstanding will all increasearrow_forward
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