User Account

All Pages

What is the expected rate of return to an investor

Assignment Help Managerial Accounting
Reference no: EM13940264

Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for 4 years. By then, other firmswill have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5%. The most recent annual dividend was DIV0 = 1 per share.

a. What are the expected values of DIV1 , DIV2 , DIV3 , and DIV4 ?
b. What is the expected stock price 4 years from now? The discount rate is 10%.
c. What is the stock price today?
d. Find the dividend yield, DIV1 / P0 .
e. What will next year's stock price, P1, be?
f. What is the expected rate of return to an investor who buys the stock now and sells it in1 year?

Projected growth......20.00%
Time ........$4.00 years
Sustainable growth rate...5.00%
Annual dividend (DIV 0)... 0 $1.00 \per share
Discount rate (b)......10.00%

Reference no: EM13940264

Questions Cloud

What is the companys target debt-equity ratio : Fama’s Llamas has a weighted average cost of capital of 9.2 percent. The company’s cost of equity is 12 percent, and its pretax cost of debt is 7.2 percent. The tax rate is 40 percent. What is the company’s target debt−equity ratio?
Capitalism and organisational ethics : Apple is the most valuable brand on the planet, making products that consumers love to buy. But how does this company treat its workers, when the world isn't looking?
Accounting break-even and the cash break-even points : In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.
In a transaction for the sale of an auto painting facility : In a transaction for the sale of an auto painting facility, Bright Auto Colors Company tells Custom Cars Corporation that the paints and other supplies on-site are included. The contract says nothing about the supplies on-site, but does state, “This ..
What is the expected rate of return to an investor : What is the expected stock price 4 years from now? The discount rate is 10%. What is the expected rate of return to an investor who buys the stock now and sells it in1 year?
Develop change management-communication strategy : Develop a change management and communication strategy incorporating organisation development aims and activities, strategic planning activities, together with an integrated communication strategy.
Organizational constraint on public criminal justce agencies : What are the organizational constraints on public criminal justice agencies? How do these constraints affect operations?
Application that stores at least four different course names : The application as written does not display certain class names included in the instructions as written.
What are job-order costing and process costing : What are job-order costing and process costing? What types of firms use job-order costing? Process costing? Give some examples of service firms that might use job-order costing, and explain why it is used in those firms.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Journalize all entries required on the given dates

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Snow Company uses straight-line depreciation.

  Relevant cost-product planning-calculate operating profit

Find out the current operatng profit for the company as whole? Supposing that all fixed cost are unavoidable, if company eliminated the unprofitable segments, what would be the new operating profit for the company as a whole be?

  Compute the overhead cost per unit for each product line

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212.

  Comment on palmer efficiency in using its assets

Comment on Palmer's efficiency in using its assets to increase sales from 2012 to2013.

  Discuss the stance and initiatives of the australian account

Discuss the way in which AGL has demonstrated its social and environmental accountability in the last two years.

  Provide the journal entry for adams contribution

Provide the journal entry for Adams contribution to the partnership - Brittany Adams contributed a patent, accounts receivable, and $61,000 cash to a partnership. The patent had a book value of $56,000.

  Explain the prerequisites necessary for accounting control

Identify and explain the prerequisites necessary for accounting control and analyse the difficulties that might be experienced in achieving them.

  Compute the irr use interpolation

Compute the net cash inflow anticipated from the sale of the device for each of the 12 years - determine the NPV of the proposed investment.

  Prepare a report outlining any issues that may be working

Prepare a report outlining any issues that may be working against effective performance measurement and incentive systems in the business units.

  How can united by blue use departmental income statements

Brian Linton's company, United By Blue, sells jewelry and apparel.

  Given the data in the table and the graph

Explain your answers. Given the data in the table and the graph, what type of market structure could this be in the short run? Explain your answers. If the data in Table-1 represents the long run, what type of firm must this data represent? Explain y..

  Should the division outsource its ceramic pots

Suppose the division has the opportunity to purchase the ceramic pot from another manufacturer for $60. The supplier is willing to hold sufficient inventories to meet Evergreen's demand. Should the division outsource its ceramic pots? Why or why n..

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