Determine the price of tractor common stock

Assignment Help Financial Management
Reference no: EM132067217

Suppose that Tractor Supply Company’s stock (TSCO) is selling for $67.00. Analysts believe that the growth rate for Tractor will be 15% next year, 20% for the following two years, and thereafter the growth rate will be 8% indefinitely. Due to its growth, Tractor will not pay a cash dividend until two years from now. At that time, the dividend per share will be $2.00. Thereafter the dividend will grow by the same rate as the company. Stockholders require a return of 18 percent on Tractor’s stock.

Required:

a) Based on the above assumptions, determine the price of Tractor’s common stock.

b) Explain whether an investor should buy the stock.

Reference no: EM132067217

Questions Cloud

Determine the probability for each stock : Determine the probability for each stock that you would earn a negative return. Explain why you would or would not buy either or both of the two stocks.
Prepare any journal entries for the equipment at december : Prepare any journal entries for the equipment at December 31, 2015. The fair value of the equipment at December 31, 2015, is estimated to be $4,600,000
Calculate the future worth of an investment fund : Calculate the future worth in year 12 of an investment fund that gets a deposit of $110,000 in the first 4 year, grows by $10,000 each year for the next.
Different portfolios of financial assets : First, form different portfolios of financial assets from different time periods such as recession and bull market based on criteria created by yourself.
Determine the price of tractor common stock : Based on the above assumptions, determine the price of Tractor’s common stock. Explain whether an investor should buy the stock.
Were the defendants actions necessary but unethical : The basic question in this case is whether the survivors should be subject to penalties under English criminal law, given the men's unusual circumstances.
Compute the amounts of total interest : During 2014, Carter Company constructed various assets at a total cost of $12,600,000. Compute the amounts of Total interest
How much of an annual retirement benefit should yusef expect : Yusef has a defined benefit retirement plan with his company. He has worked for the company for 35 years, but he is ready to retire.
Research the different types of threats : Research the different types of threats posed to the United States by domestic and international terrorist organizations.

Reviews

Write a Review

Financial Management Questions & Answers

  Projections indicate revenues-cost of goods sold

In its first year, Joe’s Start-Up Company’s first year projections indicate revenues of $125,000 and Cost of Goods Sold (CGS) of $81,250, which will be the ONLY variable cost. Depreciation will be $20,000, and cash interest on seed stage loans will b..

  Expected to grow at the firms normal growth rate

DAA's stock is selling for $15 per share. The firm's income, assets, and stock price have been growing at an annual 15 percent rate and are expected to continue to grow at this rate for 3 more years. No dividends have been declared as yet, but the fi..

  Pay off the loan in three equal annual payments

You borrow $5,900 at 10% per year and will pay off the loan in three equal annual payments starting 1 year after the loan is made.

  What is the value of this forward contract

This stock pays dividend payment of $3 each in first year and second year, respectively. What is the value of this forward contract?

  Accounts payable turnover ratio and account payment period

Calculate the following ratios for Apple company-Accounts payable turnover Ratio and Account Payment period

  What is the depletion allowance

American Pulp Corp. (APC) has entered into a contract to harvest timber for $450,000. The total estimated available harvest is 150 million board-feet. What is the depletion allowance for years 1 to 3, if 42,45, and 35 million board-feet are harvested..

  Require when there is semi-annual compounding

What nominal rate of return do you require when there is semi-annual compounding?

  Develop pro forma statement for a base year

From the above data, develop a pro forma statement for a base year showing net operating income (NOI) for Summer Place.

  What is the projects expected npv and its standard deviation

What is the project's expected NPV, its standard deviation, and its coefficient of variation? Enter your answers for the NPV and standard deviation in millions.

  What is the firms level of current liabilities

Ace Industries has current assets equal to $10 million. The company's current ratio is 2.5, and its quick ratio is 2.0. What is the firm's level of current liabilities? What is the firm's level of inventories?

  What bid price should you submit on the contract

Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,900,000 five years ago; if the land were sold today, it would net you $2,100,0..

  Exercise price of an option is equal to the current price

The option seller, also called the option writer, sells (or writes) the option and has a short position in the contract. When the exercise price of an option is equal to the current price of the stock, the option is said to be at-the-money. A holder ..

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