Firm needs to plow back its earnings to fuel growth

Assignment Help Financial Management

Reference no: EM131353010

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $15 per share exactly 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 12 percent, what is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Current share price $

Reference no: EM131353010

Questions Cloud

Short-term profits at the expense of long-term profits : Stock Valuation. Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.

Short-term profits at expense of long-term profits : Corporate Ethics. Is it unfair or unethical for corporations to create classes of stock with unequal voting righStock Valuation. Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an o..

Relieve communication problems : Communication (or the lack of it) is definitely one area that can lead to conflict within the project. How might the elements of the contract be structured to help relieve communication problems?

Unethical for corporations to create classes of stock : A substantial percentage of the companies listed on the NYSE and the NASDAQ don’t pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible? Under what circumstances might a company choose not to pay dividends. ..

Firm needs to plow back its earnings to fuel growth : Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $15 per share exactly 10 years..

Stock values-how much will you pay for company stock today : Stock Values: Diamond Corporation will pay a $3.75 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year, indefinitely. If you require a 12 percent return on your investment, how much will you pay for the ..

Analyzing project with the cash flows : Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not?

Calculating discounted payback : An investment project costs $10,000 and has annual cash flows of $2,850 for six years. What is the discounted payback period if the discount rate is zero percent? What is the discounted payback period if the discount rate is 5 percent?

Yield to maturity remains unchanged : A bond has a par value of $1,000, a time to maturity of 15 years, and a coupon rate of 9.00% with interest paid annually. if the current market price is $900, What will be the approximate capital gain of this bond over the next year if its yield to m..

User Account

All Pages