What is firm horizon or continuing-value

Assignment Help Financial Management

Reference no: EM132044461

NONCONSTANT GROWTH VALUATION

Holt Enterprises recently paid a dividend, D0, of $3.00. It expects to have nonconstant growth of 21% for 2 years followed by a constant rate of 7% thereafter. The firm's required return is 19%.

A. How far away is the horizon date? (Please select one of the numbers below)

1. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.

2. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.

3. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.

4. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.

5. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.

B. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. Do not round your intermediate calculations.

C. What is the firm's intrinsic value today, P?0? Round your answer to two decimal places. Do not round your intermediate calculations.

Reference no: EM132044461

Questions Cloud

What is firm weighted average cost of capital : Blackout's tax rate is 34 percent. What is the firm's weighted average cost of capital?

Achieve their targeted weighted average cost of capital : What debt ratio is needed for the firm to achieve their targeted weighted average cost of capital?

Present value index for capital budget proposal : Calculate the Present Value Index for a capital budget proposal.

What defences might the insurer raise : If Swalm’s spouse took legal action against the insurer, what would be the basis of her claim? What defences might the insurer raise?

What is firm horizon or continuing-value : How far away is the horizon date? What is the firm's horizon, or continuing, value?

Market risk is the same as market portfolio : How much will you pay for the property if you believe its market risk is the same as the market portfolio’s?

Determine the annual yield to maturity on the company bond : Determine the annual yield to maturity on the company bond.

Standard practices of negotiable instruments : Discuss the events that follow, and the positions of the parties, with respect to the law and standard practices of negotiable instruments.

What is the current value of bond : IBM corporation just issued a bond issue. The yield to maturity on this bond is 8.80% what is the current value of this bond?

User Account

All Pages