User Account

All Pages

Investment of retained earnings

Assignment Help Finance Basics
Reference no: EM132352321

Golden Oil (GO) expects to have earnings per share of $3.50 in year 1. GO decides to retain all of its earnings for years 1 and 2. For the next 3 years, GO will payout 40% of its earnings as dividends. GO will then payout 70% of its earnings as dividends from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 15% per year. In other words, the return on equity is expected to be 15% per annum for each year. Assume GO's shares outstanding remains constant and all earnings growth comes from the investment of retained earnings. If the required rate of return on GO shares is 10%, what price would you estimate for GO shares?

Reference no: EM132352321

Questions Cloud

What are the primary behavioral motivations : What are the primary behavioral motivations for these consumers? Explain. How does the current political environment (local, national, or global) influence.
Should the Weld-Rite Company be paid for its work : The Weld-Rite Company received an order from the XO Corporation to fabricate two of the units. Should the Weld-Rite Company be paid for its work
Jacksonville benefit from borrowing japanese yen : Can Jacksonville benefit from borrowing Japanese yen and simultaneously purchasing yen one year forward to avoid exchange rate risk? Explain.
Weighted average contribution margin per unit for miller : Miller sells in a mix of 2 units of A, 3 Units of B and 5 Units of C. What is the weighted average contribution margin per unit for Miller
Investment of retained earnings : If the required rate of return on GO shares is 10%, what price would you estimate for GO shares?
Scott cellular company sells phones : Scott's cellular company sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%
Define change you would make to current pension accounting : Defend the current GAAP rules for pension accounting reporting on the balance sheet and the income statement. Recommend a change you would make to the current.
Downside risk of a business transaction : Options can protect a firm against the downside risk of a business transaction while preserving the upside potential from the transaction.
Why you would prioritize the variances for analysis : Analyze how and why you, as a manager, would prioritize the variances for analysis and how knowing these variances might help you improve efficiency.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the size of the last withdrawal

Andre has saved $152 000.00. If he withdraws $1750.00 at the beginning of every month and interest is 7.5% compounded monthly, what is the size of the last withdrawal?

  What is immediate dilution potential for new stock issue

Louisiana Timber Company currently has 5 million shares of stock outstanding and will report earnings of $6.99 million in the current year. What is the immediate dilution potential for this new stock issue

  What is the price of the bond

What is the price of the bond, 4 years from today if the bond is not called and it has the yield-to-maturity of 6.23%?

  Discuss balance sheet and income statement characteristics

[Ratio analysis --industry characteristics] The nine companies in Exhibit 4P-3 are drawn hum the following nine induces.

  An investor will pay 231863 for an n year 2000 part bound

an investor will pay 2318.63 for an n year 2000 part bound with a coupon rate of 10 compounded semiannually or he will

  An angel investor is considering investing in one of two

1.a generous university benefactor has agreed to donate a large amount of money for student scholarships. the money can

  Calculate cleopatra weighted average cost of capital

Calculate Cleopatra's weighted average cost of capital that is appropriate to use in evaluating this capital budgeting project.

  Mechanism of futures markets

A company enters into a long futures contract to buy 1,000 units of a commodity for $60 per unit. The initial margin is $6,000 and the maintenance margin is $4,000. What futures price will allow $2,000 to be withdrawn from the margin account?

  What is the expected value of this stock five years

The required return is 16.6 percent and the growth rate is 3.5 percent. What is the expected value of this stock five years from now?

  What are the variance and expected return

What are the variance and expected return of an equally weighted portfolio of all five securities?

  Given the common dividends per share as 025 and the

given the common dividends per share as 0.25 and the earnings per share as 1.26 calculate the dividend-payout

  Money from the bank instead of factoring

That is, what is the rate R% offered by the bank at or below which you would rather borrow money from the bank instead of factoring?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd