What is the return on new investment

Assignment Help Finance Basics
Reference no: EM133060163

Sinclair Pharmaceuticals, a small drug company, will experience extremely high growth over the next few years and will reinvest all of its earnings in expanding the company over this time- Earnings of $2 per share were just reported and are expected to grow by 30% per year for the next three years. After three years of high growth, it is expected that Sinclair will payout 50% of earnings as dividends for the following 2 years. During the5e two years, the company will have the same return on new investment. After this time, growth will drop to 5% and is expected to remain at 5% forever. Five years from now Sinclair will pay dividends that are 80% of its earnings. Sinclair's cost of capital is 10%.

a) What is the return on new investment over the next 3 years for Sinclair pharmeceuticals?

b) What should the share price of Sinclair be in 5 years, immediately after paying its dividend?

Reference no: EM133060163

Questions Cloud

How many spy put options should the investor buy : An investor technology portfolio is worth currently $20,000. He believes that technology stocks will outperform other shares, but he is worried about a temporar
Record the first month amortization on Teal Mountain books : Teal Mountain's incremental borrowing rate is 6% a year (0.5% a month). Record the first month's amortization on Teal Mountain's books (assume straight-line)
Analyzing the texas state election process : How to write a discussion by analyzing the Texas state election process by analyzing a candidate for the November 2020 election.
Estimate for the new call premium : What is your best estimate for the new call premium if the market's expected volatility drops by 5 percentage points?
What is the return on new investment : a) What is the return on new investment over the next 3 years for Sinclair pharmeceuticals?
Complete the worksheet up to adjusted trial balance : Mr. Armin opened an online shop called "Mr. & Mrs. Bii's Online Shop" on January 1, 2020. Complete the worksheet up to adjusted trial balance
Assessing healthcare program-policy evaluation : Review the Healthcare Program/Policy Evaluation Analysis Template provided in the Resources. Describe the healthcare program or policy outcomes.
What is the total amount financed : In addition to the three- piece sofa set above, Kelsey and Cody also purchase a $249 coffee table and $199 end table. What is the total amount financed, includi
What happens in terms of pw : In year 3, the production volume will be 50,000 tons. What happens in terms of PW if a labor strike stops production for all of Year 7?C

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine the approximate value of a company

Determine the approximate value of a company that earns $5 this year if you wish to earn a 10 percent return and the companys earnings are expected to grow at 5 percent?

  What is the inventory turnover for the given year

In 2004, James, owner of James' Television Sales Shop, had cost of goods sold of $358,358, in 2005, it was $365,069. On the last day 2004.

  What is the current ratio for 2019

Using the financial information for Illinois Tool Works (ticker: ITW) shown below, what is the Current Ratio for 2019 and how did this metric change since 2018?

  What is the company accounts payable balance

Question 1: The terms of the sale were 3/12, net 59. What is the nominal rate? That is, compute the APR.

  What is the amount of net fixed assets

ABC Company has net working capital of $2,612, current assets of $9,741, long-term debt of $2,652, and equity of $3,926. What is the amount of net fixed assets?

  What is the purpose of the adjusted trial balance

At the end of the period, Sanders Company reports the following amounts: Assets = $12,000; Liabilities = $8,000; Revenues = $5,000; Expenses = $3,000.

  What is the reward-to-volatility ratio and client portfolio

Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%.

  What are the biggest challenges in conducting a brand audit

What do you see as the biggest challenges in conducting a brand audit? What steps would you take to overcome them?

  Return on equity for similar stocks

A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Show workings)

  What is size of each deposit of future cybernetic goodness

You estimate that you will need $887 thousand in 30 years to buy some cybernetic body enhancements, including infrared vision, retractable claws.

  How will you conduct more research

How will you conduct more research? What do you need to know to make a recommendation? What is the purpose of your report? Describe your audience. What data will you include in the report? Using your knowledge of report writing, draft an introduct..

  Calculate the total dollar interest cost

Calculate the total dollar interest cost on the loan. Assume a 365-day year. Calculate the 60-day rate on the loan. Calculate the total dollar interest cost.

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