Solution-Find key financial variables unchanged

Find key financial variables unchanged

Reference no: EM132818057

The most recent dividend Blue Mountain Breweries Limited paid was $39% per share. The company expects to pay the same dividend each year. The required rate of return for this firm is . A variety of proposals are being considered by management to redirect the firm's activities. As a shareholder, which of the following proposal would you prefer? Show your work and explain your answer.

Proposal #1: Do nothing, which will leave the key financial variables unchanged and there are no growth opportunities.

Proposal #2: Invest in a new machine that will increase the dividend growth rate to a constant rate of 6%. However, this will increase the required rate of return to 14%.

Proposal #3: Expand operations to a new area that would increase the growth rate for the next three years to 6% and then remain constant at 2% per year forever. However, in this case the required rate of return is expected to decrease to 8%.

Reference no: EM132818057

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Find key financial variables unchanged

Reference no: EM132818057

Reference no: EM132818057

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