Cumulative voting system allow minority representation

Assignment Help Financial Management

Reference no: EM131583655

You prefer to use the Gordon Growth (constant growth) Model to price the stock of the Hines Company. You estimate that they will pay a dividend of $3.00 next year and will continue to grow at 7% for the foreseeable future.

a. What is the maximum you should pay for a share of this company if you demand a 14% rate of return? What will be the price of the share a year later if the growth rate continues as estimated?

b. Assume a year later, you observe the price of the share to be $35.67 instead of that estimated in 4(a), what rate of return is the market requiring? All other information remains the same as in (a).

c. Upon further analysis, you determine that your earlier estimates are wrong. Your new estimates indicate that after the payment of $3.00 next year, the dividends will grow at a much faster rate of 15% for the next three years. Thereafter, it will grow at a constant rate of 7%. What will be the price of the share today? Use any other information required from 4(a).

d. How does a cumulative voting system allow minority representation in corporations?

Reference no: EM131583655

Questions Cloud

What is the face value of contract : Imagine that you are supposed to design standard coupon bonds that mature in 10 years. What is the face value of contract B?

Planning for retirement-rate of return on yearly investments : Assume that all payments are made at the end of a year, and that the rate of return on all yearly investments will be 8.4% annually.

Construct loan amortization schedule : Construct a loan amortization schedule for a $3,500,000, 3-year loan, made at 6.85% quoted annual rate.

Company to pay underwriter spread and administrative costs : What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs?

Cumulative voting system allow minority representation : How does a cumulative voting system allow minority representation in corporations?

Explain the role of indentures and protective covenants : Explain the role of indentures and protective covenants when companies issue bonds. Be brief.

Who-is-insured clauses-limits of insurance section : exclusions, definitions, who-is-insured clauses, limits of insurance section, personal property section, supplementary payments and conditions

What is total amount of interest paid over life of the loan : What is the total amount of interest paid over the life of the loan? What total amount of interest is paid over the life of the loan?

Relationship between the required rate of return on a stock : Discuss the relationship between the required rate of return on a stock,

User Account

All Pages