Assume the market is in equilibrium with required return

Assignment Help Financial Management

Reference no: EM13849025

Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 70% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 8% per year. If the required return on the stock is 17%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Round your answer to the nearest cent. Do not round your intermediate computations.

Reference no: EM13849025

Questions Cloud

Calculate the degree of operating leverage : Calculate the degree of operating given: sales of 25,000; variable costs of 13,000, operating income of 7,000 for year one, and sales of 40,000, variable costs of 15,000 and operating income of 16,000 for year 2. (Specifically, calculate difference b..

Explain the major ethical implications of the selected study : Explain the major ethical implications of the selected study

Annualized interest rates-inflation rate : A 150% local currency return in Brazil is higher than a 15% dollar return in the U.S. If annualized interest rates in the U.S. and Sweden are 9% and 13%, respectively, and the spot value of the Swedish krona is $.1090, then at what 180 day forward ra..

A treatment plan that would include some of the technology : Create a treatment plan that would include some of the techniques

Assume the market is in equilibrium with required return : Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.50 coming 3 years from today. what is..

Current and future system integration challenges : Evidence of evaluation, judgement and critical reflection and evidence of the ability to apply knowledge to a practical situation

What social scripts appear to be at play : What aspects of intimate relationships and sexuality are being highlighted? Ignored? What social scripts appear to be at play? What are the societal consequences of these messages

Calculate break-even in dollars : Calculate break-even in DOLLARS given the following information: sales per unit $40, variable costs $15, fixed costs $15,000, and desired profit $20,000.

Initial investment-cash inflow-calculate net present value : Calculate the net present value of a 20 year project with an initial investment of $15,000 and a cash inflow of $2,000 per year. Assume that the firm has an opportunity cost of 17%.

User Account

All Pages