Current price of the common stock

Assignment Help Finance Basics
Reference no: EM132535045

The Pet Company has recently discovered a type of rock which, when crushed, is extremely absorbent. It is expected that the firm will experience (beginning now) an unusually high growth rate (20%) during the period (3 years) when it has exclusive rights to the property where this rock can be found. However, beginning with the fourth year the firm's competition will have access to the material, and from that time on the firm will assume a normal growth rate of 8% annually. During the rapid growth period, the firm's dividend payout ratio will be relatively low (20%), to conserve funds for reinvestment. However, the decrease in growth will be accompanied by an increase in dividend payout to 50%. Last year's earnings were $2.00 per share (E0) and the firm's cost of equity is 10%. What should be the current price of the common stock?

Reference no: EM132535045

Questions Cloud

Collecting information should earn excess returns : Evaluate the following statement: "An efficient market seems like an impossible concept. In an efficient market, no one earns excess returns; no one
How long must live after the day retired to come out : How long must she live after the day she retired to come out ahead (that is, to get more in value than what she paid in)? She must live at least years
Price of the bonds based on semiannual analysis : Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What will the new cost of retained earnings be : If inflation is expected to increase by 0.03 next year, but everything else remains the same, what will the new cost of retained earnings be?
Current price of the common stock : Last year's earnings were $2.00 per share (E0) and the firm's cost of equity is 10%. What should be the current price of the common stock?
Governments perceive lower risk of disaster : In your opinion why do many local governments perceive a lower risk of a disaster for their communities than actually exists?
What is the company cost of retained earnings : If a company has BBB rated bonds with a yield of 0.06 and the risk premium is 0.04, what is the company's cost of retained earnings?
What is the expected price of the stock : RRT Inc.'s preferred stock pays $12 per share, its beta is 1.2. If the risk-free rate is .04 and the market risk premium is .08,
What is the project mirr : AQD Inc. is considering a project that has the following cash flows. What is the project's MIRR?

Reviews

Write a Review

Finance Basics Questions & Answers

  How much is dominique savings worth today

How much is Dominique's savings worth today given that the fund has earned an annual return of 3.0%?

  Maryrsquos replacement is unexpectedly hired away by

mary has been working for a university for almost 25 years and is now approaching retirement. she wants to address

  What is the value of each warrant

However, with the warrants attached the bonds will pay a 6% annual coupon and still sell for the face value of $1,000. What is the value of each warrant?

  Determining the dupont analysis

What is its total assets turnover? Round your answer to two decimal places. What is its equity multiplier? Round your answer to two decimal places.

  Who was obligated to notify blackston of the assignment

The clerk of the court assigned the right to receive the payments to the Department of Human Resources. Who was obligated to notify Blackston of the assignment?

  Annual coupon rate and yield to maturity

A 11- year bond pays interest of 28.10 semiannually, has a face value of $1000 and is selling for 735.85. What are it's annual coupon rate and yield to maturity

  Why is van muur soliciting control of chestnut

Why is Van Muur soliciting control of Chestnut? What is the better proposal, Pederson's or Van Muur's? What should Pederson do?

  Why a pension fund consider selling stock index futures

Selling Stock Index Futures : - Why would a pension fund or insurance company consider selling stock index futures?

  Qyou have been asked by president of your firm to estimate

q.you have been asked by president of your firm to estimate proposed acquisition of new special-purpose equipment.

  What is the current yield

The 5.63 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $936.78. What is the current yield?

  What should be the value of this stock

The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock..

  Determine what is the prospective rate of return

A company purchases a piece of manufacturing equipment for rental expected income is $3500 the first semester. Its useful life is 9 years.

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