Before converging to the industry median growth rate

Assignment Help Financial Management

Reference no: EM131051227

The Fast-Growth Company recently paid a dividend of $3.20 per share. Analysts expect the dividend to grow at the rate of 28% per year for 3 years, then by 16% for 3 more years, before converging to the industry median growth rate of 7%. The firm’s beta has been estimated at 1.15 by Value-Line analysts. If treasury securities are currently yielding 5.5% and the average return on the market portfolio is expected to be 12.5%, what is the most you should be willing to pay for a share of this common stock?

Reference no: EM131051227

Questions Cloud

Basic macroeconomic topic : First find an article that is about a basic macroeconomic topic. The article can be from the internet, newspaper, or a magazine. The topic of the paragraph is what the article is about.

Describe how the processor computes the tag : Based on your results in parts (a) and (b), design and describe a simple routing scheme for distributed control of the Omega network. A message will carry a routing tag computed by the sending processor. Describe how the processor computes the tag..

Federal reserve takes actions that increase risk-free rate : BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant? The exercise price of the option is increased. ..

Control purchasing and accounts payable : An accounting information system (AIS) must include certain source documents in order to control purchasing and accounts payable. For a manufacturing organization, the best set of documents should include:

Before converging to the industry median growth rate : The Fast-Growth Company recently paid a dividend of $3.20 per share. Analysts expect the dividend to grow at the rate of 28% per year for 3 years, then by 16% for 3 more years, before converging to the industry median growth rate of 7%. The firm’s be..

How long will take you to pay off mortgage after refinancing : The mortgage on your house is 5 years old. It required monthly payments of 1,422, had an original term of 30 years, and had an interest rate of 10% (APR –monthly). What monthly repayments will be required with the new loan? Suppose you are willing to..

Lombard frequently sells similar items : On January 1, 2014, Lombard Co. sells property for which it had paid $690,000 to Sargent Company, receiving in return Sargent's zero-interest-bearing note for $1,000,000 payable in 5 years.

What is the expected return for a stock with a beta : You have just purchased a home and taken out a $420,000 mortgage. the mortgage has a 30-year term with monthly payments and an APR of 7.44%. how much will you pay in interest, and how much will you pay in principal, during the first year? What is the..

Calamitous earthquake losses : Because of calamitous earthquake losses, Bernstein Company, one of your client's oldest and largest customers, suddenly and unexpectedly became bankrupt. Approximately 30% of your client's total sales have been made to Bernstein Company during eac..

User Account

All Pages