Find the value of the stock using given information

Reference no: EM132019473

Question: Nonconstant Growth Stock Valuation

Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 70% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 15%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Round your answer to the nearest cent. Do not round your intermediate computations.

Reference no: EM132019473

Questions Cloud

What is subrogation : What is subrogation? As a renter pilot, how can you protect yourself against subrogation?

Explain the employment at will doctrine : Identify why or why not and determine all the possible exceptions per the EAW Doctrine that is applicable, might be or could be applicable .

Find the standard deviation of returns : Normal probability distribution Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return r.

Describes a plan for standards to protect the users : Analyzes measures that are necessary to protect the transfer of data to and from the network - Analyzes common vulnerabilities, risks, and issues in networking

Find the value of the stock using given information : Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins.

What is the cost of internal common equity : What is the cost of internal common equity if the long-term growth in dividends is projected to be 8.5 percent indefinitely?

Calculate the range of expected return outcomes : Calculate the range of expected return outcomes associated with the following probabilities of? occurrence: (1) 68%, (2) 95%, (3) 99%.

What is the post-tax cost of debt for newly-issued bonds : The marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds?

Describe any sources of risk or uncertainty in its operation : Describe the company and provide a brief history of its operations. Find or use graphs to illustrate its financial performance over the years

User Account

All Pages