Compute current price of the stock

Assignment Help Financial Management
Reference no: EM131907336

Robotic Atlanta Inc. just paid a dividend of $4.00 per share (that is, D0 = 4.00). The dividends of Robotic Atlanta are expected to grow at a rate of 20 percent next year (that is, g1 = .20) and at a rate of 10 percent the following year (that is, g2 = .10). Thereafter (i.e., from year 3 to infinity) the growth rate in dividends is expected to be 5 percent per year. Assuming the required rate of return on Robotic Atlanta stock is 9 percent, compute the current price of the stock. (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

Reference no: EM131907336

Questions Cloud

How retailers lower their prices for black friday deals : Do you agree with this statement? Why or why not? Think about how retailers lower their prices for Black Friday deals.
Maturity assuming that bond yield to maturity : Compute the price of a $1,000 par value, 8 percent coupon bond with 28 years remaining until maturity assuming that bond's yield to maturity is 18%.
How long will it take to recover initial investment : Services United is considering a new project that requires an initial cash investment of $78,000. How long will it take to recover the initial investment?
What effective annual rate will firm pay for financing : What effective annual rate will the firm pay for financing with commercial? paper, assuming that it is rolled over every 118 days throughout the? year?
Compute current price of the stock : Assuming the required rate of return on Robotic Atlanta stock is 9 percent, compute the current price of the stock.
Accounts receivable as collateral-cost of borrowing : It then will lend up to 90% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software?
At what price will the stock reach equilibrium : At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today?
Compensating balance versus discount loan : Calculate the effective annual rate of interest on each loan. What could Weathers do that would reduce the effective annual rate on the State Bank? loan?
What is the financial break-even point point for the project : The appropriate discount rate is 10 percent. What is the financial break-even point point for the project?

Reviews

Write a Review

Financial Management Questions & Answers

  How much should you willing to pay to purchase one share

Last month, Town Deli paid an annual dividend of $3.75 per share. The general consensus is that dividends will increase by 3.5% annually and you require a 15% annual rate of return, how much should you willing to pay to purchase one share of this sto..

  Decrease in cash flow from operations could be caused

If current interest rates are higher than a bond's coupon rate, owners can. A DECREASE in Cash Flow from Operations could be caused by:

  Reduction in the total fixed cost change break even price

How does this reduction in the total fixed cost change the break even price?

  What is the price of the bond

If the market demands 8.1 percent required rate on the bond, what is the price of the bond?

  Expected and required rates of return

Assume that the risk-free rate is 6.5% and the market risk premium is 4%. What is the expected return for the overall stock market? Round your answer to two decimal places. What is the required rate of return on a stock with a beta of 1.8? Round your..

  What nominal rate of return should you expect to earn

If these averages hold, what nominal rate of return should you expect to earn on small company stocks over the next several years?

  What would be the new price for each bond

If the market rate of interest on each bond fell from 10 percent to 7 percent and the durations found in part (a) remained constant, what would be the new price for each bond?

  What is the company cost of preferred stock

If the company is to issue preferred stock, what is the company’s cost of preferred stock?

  Which pays quarterly interest at annual coupon rate

Calculate the value (price) of a $5,000 par value bond which pays quarterly interest at an annual coupon rate of 9.51% and has 13 years until maturity.

  Expectations theory of the term structure of interest rates

According to the expectations theory of the term structure of interest rates,

  What will be the yearly withdrawal for the son from trust

A wealthy parent is trying to fund a trust fund for his oldest son. What will be the yearly withdrawal for the son from the trust?

  The taxadvantage of debt and bankruptcy-cost

There are several reasons why the capital structure (that is, the relative size of debt and equity) may affect the value of the firm. These include (I) the taxadvantage of debt, (II) bankruptcy-cost, (III) agency cost of equity, (IV) agency cost of d..

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