Calculate the price that you should pay today for a share

Assignment Help Financial Management

Reference no: EM132051469

Wally's Warehouses just went public with an initial public offering of stock. Wally's stock is not expected to pay any dividends for the next two years.

One year after that time (i.e three years from now), Wally's will pay a $1.00 per share dividend which will grow the next year to $2.00 per share.

After this, the dividend will decline by 5% per year forever from that point in time as Wally's warehouses become obsolete. Wally's Warehouses is too new to have a Beta yet, but analysts think its Beta should be 0.8.

Analysts also think that the S&P 500 can earn a steady state return of 10% annually and currently US treasury bonds yield 2% annually.

Calculate the price that you should pay today for a share of Wally's Warehouses stock

Reference no: EM132051469

Questions Cloud

Determine the total expenditure function : Planned investmet I=11000. Government spending G=20000. Net taxes T= 16000. Question determine the total expenditure function

How many bonds will wallpaper need to sell : How many bonds will Wallpaper need to sell in order to receive the $1.09 million that is necessary?

What is the short-run equilibrium gap called : What is the short-run equilibrium gap called? Why?

How many years would it take for the project to be able : If the project provides a certain amount of annual cash flow for 10 years, what is the minimum annual cash flow the firm should accept to cover costs?

Calculate the price that you should pay today for a share : Wally's Warehouses just went public with an initial public offering of stock. Wally's stock is not expected to pay any dividends for the next two years.

Discuss how dollar devaluation impacts businesses : Question 1: Discuss how dollar devaluation impacts businesses and consumers in the twin cities of El Paso, the United States, and Juarez, Mexico?

The market expect the 1-year treasury rate to be six years : According to the unbiased expectations theories, what does the market expect the 1-year Treasury rate to be six years from today, E(7r1)?

Fiscal measures may help a recessionary condition : Do you think we are moving towards a recessionary lag under the new administration? (trump administration) justify your answer

What does the market expect the 2-year treasury rate : The Wall Street Journal reports that the rate on 8-year Treasury securities is 1.75 percent and the rate on 10-year Treasury securities is 2.70 percent.

User Account

All Pages