User Account

All Pages

Pays no cash dividends currently

Assignment Help Financial Management
Reference no: EM13937344

The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next 4 years. Its latest EPS was $5.2, all of which was reinvested in the company. The firm’s expected ROE for the next 4 years is 18% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm will payout all of its earnings as dividend and the firm’s ROE on new investments is expected to fall to 13% per year. GG’s market capitalization rate is 17% per year.

What is your estimate of GG’s intrinsic value per share? (Round your answer to 2 decimal places.)

Reference no: EM13937344

Questions Cloud

Make recommendations regarding capital budgeting : You been asked to make recommendations regarding capital budgeting for IDK, Inc. specifically, the company has identified 5 projects that it is considering undertaking. The projects are independent of each other, and if resources allowed, the company..
Identified the two mutually exclusive projects : Mahjong, Inc., has identified the following two mutually exclusive projects: What is the IRR for Project A? If the required return is 8 percent, what is the NPV for Project A?   At what discount rate would the company be indifferent between these two..
Evaluating a new gold mine : Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. The expected cash flows each year from the mine are shown in the tabl..
Decide between two different conveyor belt systems : Eads Industrial Systems Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $427,000, has a 6-year life, and requires $115,000 in pretax annual operating costs.
Pays no cash dividends currently : The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next 4 years. Its latest EPS was $5.2, all of which was reinvested in the company. What is your estimate of GG’s intrinsic value per share?
What constant growth rate would the company just break even : The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $93,000 for the firm during the first year, and th..
What is the payback period for each project : Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 347,000 –$ 49,500 1 48,000 24,300 2 68,000 22,300 3 68,000 19,800 4 443,000 14,900 which ever project you choose, if any, you require a 15 percent return on..
Evaluate generation project with the cash flows : Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 –$ 39,400,000 1 63,400,000 2 – 12,400,000 a-1 What is the NPV for the project if the company requires a return of 10 percent?
Hedging using futures : Suppose a farmer is expecting that her crop of oranges will be ready for harvest and sale as 150,000 pounds of orange juice in 3 months time. Suppose each orange juice futures contract is for 15,000 pounds of orange juice, and the current futures pri..

Reviews

Write a Review

Financial Management Questions & Answers

  Benchmark for determining projects cost of capital

The corporate cost of capital provides a benchmark for determining a project's cost of capital. In general, projects that are riskier than average must have a cost of capital that is higher than the corporate cost of capital, while projects that are ..

  Calculate the Cash Flow DOL for this firm

The law firm of Dewey, Cheatem, and Howe has monthly fixed costs of $98,000, EBIT of $223,000, and depreciation charges on its office furniture and computers of $7,000. Calculate the Cash Flow DOL for this firm.

  Financial objectives

Your child will go to college 10 years from now and will require $12,000 at the beginning of each year for 4 years. At the end of their fourth year of college you plan on buying them a new car as a graduation present. The car will cost $23,000. how m..

  Market capitalization rate-produce level dividend stream

Company Y does not plow back any earnings and is expected to produce a level dividend stream of $5.20 a share. If the current stock price is $40.20, what is the market capitalization rate?

  Important goal for healthcare organizations

We learned that market share is an important goal for healthcare organizations. What are some examples of how market share may be improved, or increased?

  The average annual salary for a person living

In 2005, the average annual salary for a person living in the Washington,D.C. Area was about 1.16 times the average annual salary for a person living in Hartford, Connecticut. If the average annual salary in Hartford was $42,706, what was the average..

  Dividend policy results in most consistent dividend stream

In industries with volatile earnings, the residual dividend policy results in the most consistent dividend stream. If the clientele effect is correct, firms should follow a constant dividend payout ratio policy. In general, the higher the number of p..

  Value of equity after recapitalization

Nicki Corporation's value of operations is equal to $500 million after a recapitalization (the firm had no debt before the recap). It raised $150 million in new debt and used this to buy back stock. Nicki had no short-term investments before or after..

  The project will create the cash flows

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government ha..

  Whats its turnover ratio

An open end mutual fund has average daily assets of $3.4 billion during the year. It sold $1.25 billion worth of stocks and bought $1.4 billion worth of stocks during the year. What’s its turnover ratio? Explain the difference between an open end fun..

  What will be the annual interest cost

Blandet Company has $4,000,000 in assets. It has decided to finance 30% with long term financing (9%rate) and 70% with short-term financing (7%) rate. What will be the annual interest cost?

  Offered an investment plan

You have $18,750 you want to invest for the next 30 years. You are offered an investment plan that will pay you 9 percent per year for the next 15 years and 13 percent per year for the last 15 years. How much will you have at the end of the 30 years?..

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