What is ontel growth rate

Assignment Help Finance Basics
Reference no: EM133119430

Ontel Inc expects an EPS of $10 and DPS (dividend per share) of $6 next year and expects to  maintain the same payout ratio for the foreseeable future. It has an opportunity to invest its retained earnings at an ROIC of 15%.

a. What is Ontel's growth rate?

b. Given a cost of capital of 12%, what is Ontel's price per share?

Suppose Ontel announces that it is going to decrease its dividend to $4 next year in order to retain more money into its projects.

C. Calculate the new stock price, assuming that the rest of the parameters of the question stay unchanged. Explain why the new stock price increases.

D. In real life, when a firm announces a decrease in dividends the stock price usually goes down. Explain what could be the reason for the discrepancy between the increase in price in (c) and the negative announcement effect.

Reference no: EM133119430

Questions Cloud

What is the effective annual yield : Anna and Clara are considering buying treasury bills. Anna wants to buy a Treasury Bill that has a quoted Bond Equivalent Yield equal to 6% and 100 days to matu
How much is this investment worth today : You are offered an investment that will pay you $200 in one year, $400 the next year, $600 the year after, How much is this investment worth today
Employer-sponsored retirement plan : Barry has just become eligible for his? employer-sponsored retirement plan. Barry is 40 and plans to retire at 65. Barry calculates that he can contribute ?$3,8
Calculate the yield to maturity of the bond : Calculate the yield to maturity of the bond (note: PV is negative because it is a cash outflow, i.e., it costs $900 to purchase the bond).
What is ontel growth rate : Ontel Inc expects an EPS of $10 and DPS (dividend per share) of $6 next year and expects to maintain the same payout ratio for the foreseeable future.
What is minimum expected starting salary : What is minimum expected starting salary after graduation that makes going to a business school a positive-NPV investment for John
What is the principal outstanding : The interest rate on the loan was 12 percent compounded monthly. You have just made the 120th payment. What is the principal outstanding?
Compute the risk premia on abc : Compute the risk premia on ABC for each year and save those for the next problem. Here, answer the following. What was the average risk premium on ABC over this
List interesting information about your attractions : World-renowned Tourist Attractions - Waterways -Rhine, Danube, Rhone, Volga - Plan a day by day itinerary to each destination of your choice

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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