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Trump Office Supplies paid a $5 dividend last year. The dividend is expected to grow at a constant rate of 8 percent over the next four years. The required rate of return is 22 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. Anticipated Value D1 D2 D3 D4 b. Calculate the present value of each of the anticipated dividends at a discount rate of 22 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) PV of Dividends D1 D2 D3 D4 Total c. Compute the price of the stock at the end of the fourth year (P4). (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price at Year 4 d. Calculate the present value of the year 4 stock price at a discount rate of 22 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value of Year 4 stock price e. Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Current value f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) P0 = D1 Ke − g Current value g. If current EPS were equal to $4.10 and the P/E ratio is 1.60 times higher than the industry average of 6, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price h. By what dollar amount is the stock price in part g different from the stock price in part f? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Amount i. With regard to the stock price in part f, indicate which direction it would move if: (1) D1 increases (2) Ke increases (3) g increases.
ABC Corp. currently has an inventory turnover of 9, a payables turnover of 7.76, and a receivables turnover of 13.55. How many days are in the cash cycle?
You invested $1,250,000 with a market-neutral hedge fund manager. The fee structure is 2/20, and the fund has a high-water-mark provision. Suppose the first year the fund manager loses 7 percent, and the second year she gains 21 percent. Assume manag..
The following data apply to Grullon-Ikenberry Inc. Value of operations $1000 Short – term investments $100 Debt $300 Number of shares 100 The company plans to distribute $50 as dividend payments. What will the intrinsic per share stock price be immed..
A firm wishes to maintain an internal growth rate of 7.5 percent and a dividend payout ratio of 25 percent. The current profit margin is 5.9 percent, and the firm uses no external financing sources. What must total asset turnover be?
Suppose, for our example, that you anticipate receiving $20,000 in inflation-adjusted Social Security payments each year
Calculate the price of each bond if the interest rate is 3 percent and if the interest rate is 6 percent.- which bond price falls by a larger percentage?
1.what factors affect a firms degree of transaction exposure in a particular currency? for each factor explain the
Information Systems Technology (IST), which develops software for the health care industry, was founded five years ago by Donald Brown and Margaret Clark, who are still its only stockholders. What are the advantages and disadvantages of the residual ..
If you use this data set, as is, to regress sales on advertising, will it adequately capture the behavior that advertising in one month doesn't really affect sales in that month but only in future months?
You are given the following financial data for company A: Cash =$5,000; inventories = $1,000; account receivable = $700; othercurrent assets = $500; long term assets = $1,000; accounts payable= $800; other current liabilities = $4,000; long term liab..
nvestors require a 15% rate of return on Levine Company's stock (that is, rs = 15%). What is its value if the previous dividend was D0 = $2.25 and investors expect dividends to grow at a constant annual rate of (1) -3%, (2) 0%, (3) 3%, or (4) 13%? Ro..
LaPorta, Lakonishok, Shleifer, and Vishny (“Good News for Value Stocks,” Journal of Finance, June 1997) study the returns on stocks on the few days surrounding their quarterly earnings announcements (relative to various expected return benchmarks).
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