Calculate the expected dividend yield

Assignment Help Business Management
Reference no: EM131375847

Wayne-Martin Electric Inc. (WME) has just developed a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, WME is expected to experience a 15 percent annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and WME's growth rate will slow to 5 percent per year indefinitely. Stockholders require a return of 12 percent on WME's stock. The most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.

a. Calculate WME's expected dividends for t = 1, t = 2, t = 3, t = 4, and t = 5.

b. Calculate the value of the stock today, P^0. Proceed by finding the present value of the dividends expected at t = 1, t = 2, t = 3, t = 4, and t = 5 plus the present value of the stock price which should exist at t  5, P^5. The P^5 stock price can be found by using the constant growth equation. Notice that to find  P^5, you use the dividend expected at t = 6, which is 5 percent greater than the t = 5 dividend.

c. Calculate the expected dividend yield, D1/P0, the capital gains yield expected during the first year, and the expected total return (dividend yield plus capital gains yield) during the first year.

(Assume that P^0 = P0, and recognize that the capital gains yield is equal to the total return minus the dividend yield.) Also calculate these same three yields for t  5 (e.g., D6/P5).

Reference no: EM131375847

Questions Cloud

What do you recommend microsoft do regarding bing : What do you recommend Microsoft do regarding Bing? Can Bing catch up to Google in search? How did Yahoo lose its lead in search to Google?
What is gordon model value for levines stock : Using data from part a, what is the Gordon (constant growth) model value for Levine's stock if the required rate of return is 15 percent and the expected growth rate is (1) 15 percent or (2) 20 percent? Are these reasonable results? Explain.
Explain the operation of lead and lag compressors : Why is a cooler shell and suction line insulated on a unit that is located indoors?
Discuss the trial practices and legal issues based on civil : From the scenario, analyze the general points between initiating civil procedures, the prevalent practices of these procedures within health care litigation solutions, and the influence of corporate structure on resolutions and subsequent legal pr..
Calculate the expected dividend yield : Calculate the expected dividend yield, D1/P0, the capital gains yield expected during the first year, and the expected total return (dividend yield plus capital gains yield) during the first year.
What is the purpose of a chiller economizer : What type of capacity control is used for a centrifugal compressor that is driven by a constant-speed motor?
How an investigator prepares a criminal case for trial : Explain how an investigator prepares a criminal case for trial.Explain the proper courtroom demeanor needed for an investigator and how his/her demeanor, looks, and body language can affect a trial. Find an article from the Web in which an..
Analyze data sets and uncover important information : The paper must (a) apply and reference new learning to each of the ten course elements, (b) build upon class activities or incidents that facilitated learning and understanding, and (c) present specific current and/or future applications and relev..
How should refrigerant be transferred from a chiller : What could happen if you charge liquid refrigerant into a chiller that is under a deep vacuum?

Reviews

Write a Review

Business Management Questions & Answers

  Running the business as a sole proprietorship

What are the advantages and disadvantages of running the business as a sole proprietorship?  - As a corporation?

  Illustrate what type of entrepreneur

Using an organization's existing resources to launch new products and generate new profits is an example of illustrate what type of entrepreneur?

  Identify the customer key issues

Select a product that you like or a product you use. Design a sales presentation/campaign that introduces an idea for the product, or a better way to promote the product. How you will hook your listener and Identify the customer's key issues

  Meaning of the acronym smart

In your own words, First, provide the meaning of the acronym SMART with respect to training goals. Then, consider these four training objectives. Rewrite them as two SMART training goals.

  Identify a significant challenge the leader faced

Identify a significant challenge the leader faced and how the challenge was handled. Did the response align more with a managerial role or a leadership role?

  Establish a clear difference from retailers

What should online retailers do to establish a clear difference from retailers that have off line stores What should be the strategies for retailers with physical locations that intend to also establish themselves online

  Nationwide automobile insurance company

You have recently been promoted to administrator for the data warehouse of a nationwide automobile insurance company. You are asked to prepare a checklist for selecting a proper vendor tool to help you with the data warehouse administration.

  Identify the companys stakeholders

Key Parties. (1)Who are the principal parties (i.e., the key parties) involved in the case study?List and briefly identify them.(2) For the primary business in the case studyonly, (a) identify the company's stakeholders.

  Affirmative action plan validitythe fairview county public

affirmative action plan validitythe fairview county public library has 516 employees including 163 librarians. a study

  How the information systems you have chosen for organization

Talk about how the information systems you have chosen for your organization can be used to transform data into information, and information into knowledge

  Measuring organizational business decisions

Measuring Organizational Business Decisions (beginning on page 48, Business Driven Information System by P. Baltzan) are critical to business. If you are working now or in the past, compare and discuss your business success metrics with those list..

  Company assigned-avery dennison corp

Analysis of Historical Performance (revenue and market share for 5 years) and Implications for Financial Management. Discuss the reasons (external and internal) for the yearly changes in the data.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd