How much would you pay for one share of stock today

Assignment Help Financial Management
Reference no: EM131338427

The Alpha Tool Corporation has never paid a dividend, but the new company president has announced that the firm would pay its first dividend exactly two years from now. That dividend is expected to be $2 per share. It is anticipated that this dividend will grow by 15 percent for the following three years, and by 10 percent for the two years after that.

No explicit dividend forecast is available beyond that point in time, although the firm is expected to continue to pay some dividends every year. The stock's current price-to-earnings (P/E) multiple is 15 times. The company (and investigators) expect the P/E multiple to remain constant for the foreseeable future. Earnings per share at the end of year 6 are expected to be $7.

The company's marginal tax rate is 40 percent and the firm has a capital structure consisting of 40 percent debt (at a pretax cost of 20 percent) and 60 percent common equity. If you require a 15 percent rate of return on this stock, how much would you pay for one share of stock today?

Reference no: EM131338427

Questions Cloud

Find the linear velocity of a point on each planet''s equator : Compare the linear velocity of a point on the equator of Mars with a point on the equator of Earth.
Defining the project scope : Review the project case. Determine the scope of the District 4 Production Warehouse Move project from the information provided in the case. Using the Project Scope Checklist, prepare a scope document for review and approval by the project sponsor ..
What value would whitehurst place on the ivanhoe stock : If Whitehurst requires a 12 percent rate of return on investments of this type, what value would Whitehurst place on the Ivanhoe stock?
Write a few sentences for the conclusion : How did the answers from your survey from students in KSA differ or were similar to the library research in your three topic or theme areas?
How much would you pay for one share of stock today : Earnings per share at the end of year 6 are expected to be $7.-  If you require a 15 percent rate of return on this stock, how much would you pay for one share of stock today?
Create a one page word file that contains given three things : Create and print a one page WORD file that contains three things: Your conclusions about your vertical common size financial statements and their associated industry data.
Happens as the hurricane moves closer : When a hurricane moves inland, it may encounter a mountain range. Describe and discuss what happens as the hurricane moves closer to the mountain range. What happens to the intensity? What results in the most damage (ie: wind, rain, storm surge, e..
Biggest decisions that any healthcare organization : One of the biggest decisions that any healthcare organization can make today is the selection of a new healthcare information system. With so many options available today, how would you go about selecting the best information system for your own c..
What constant growth rate would that analyst recommend : What constant growth rate would that analyst recommend using if she believes in capital market efficiency and the capital asset pricing model? Do you agree with her valuation recommendation? Why or why not?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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