What is the value per share of your firms stock

Assignment Help Financial Management
Reference no: EM131177469

Assume that the average firm in your company's industry is expected to grow at a constant rate of 7% and that its dividend yield is 6%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 30% the following year, after which growth should return to the 7% industry average. If the last dividend paid (D0) was $1.75, what is the value per share of your firm's stock? Round your answer to the nearest cent. Do not round your intermediate computations.

Reference no: EM131177469

Questions Cloud

What problems might occur with full implementation of rfid : What problems might occur with the full implementation of RFID technology in retail industries? Specifically consider the amount of data that might be collected.
In the accumulation phase of the investor life cycle : A group of securities with similar characteristics is called a(n).  In the accumulation phase of the investor life cycle.
Identify a modern day religious or political center : Identify a modern day religious or political center that these call to mind. Compare Angkor in southeast Asia with the city of Benin in West Africa, and discuss differences, similarities, and religious ideals in each place.
What is the arbitrage profit and what is strategy to earn it : European-style options on foreign currencies trade at the Philadelphia Exchange. A call option on sterling with an exercise price of 0.925 £/$ and a time to expiration of 3 months has a price of 0.0125 £/$. what is the arbitrage profit and what is th..
What is the value per share of your firms stock : Assume that the average firm in your company's industry is expected to grow at a constant rate of 7% and that its dividend yield is 6%. Your company is about as risky as the average firm in the industry, what is the value per share of your firm's sto..
Equilibrium with required return equal to expected return : A stock is trading at $60 per share. The stock is expected to have a year-end dividend of $3 per share (D1 = $3), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in ..
Portfolios performance against certain index : Your portfolio consists of Microsoft and Google. On September 15, you fully invested you $1,000 on these two stocks with 50% of your money going into Microsoft (purchase price=$25 per share) and Google was purchased at $500 per share. On November 8, ..
How does attribution theory apply to reducing stigma : What role does a sociocultural model of psychopathology have in the context of the study? Explain. How does attribution theory apply to reducing stigma and increasing employment?
How much should jane deposit each month into her account : Jane would like to save money for her son’s college education by making monthly deposits into an account that earns 2.9% annual interest compounded monthly. Jane’s son will be 18 in 16 years and she would like to have $45, 000 for his education when ..

Reviews

Write a Review

Financial Management Questions & Answers

  Statements is correct concerning discount bonds

Which one of the following statements is correct concerning discount bonds? Which of the following will increase if the coupon rate increases? Assuming there is no default risk, both a premium bond and a discount bond must share which one of the foll..

  Net working capital of the firm

It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145 and the net working capital of the firm

  Overestimate or underestimate their growth rate

How do you think firms should go about predicting this growth rate so that they do not overestimate or underestimate their growth rate?

  Minimum-maximum credit-refundable or non-refundable credits

Discuss the underlying rationale for one of the following tax credit items. Explain any restriction on claiming the credits such as AGI limitations, minimum and maximum credit, refundable or non-refundable credits etc. Please do not duplicate your pe..

  Considering the acquisition of production equipment

A company is considering the acquisition of production equipment which will reduce both labor and materials costs. The cost is $100,000 and it will be depreciated on a straight-line basis down to $0. The firm’s tax rate is 35 percent and the required..

  How sensitive is OCF to changes in quantity sold

Consider a three-year project with the following information: initial fixed asset investment = $710,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $34.75; variable costs = $22.90; fixed costs = $213,500; ..

  What is the argument for issuing preferred shares

Common stock financing is often considered the safest form of financing, as the issuing firm is under no obligation to pay dividends. Owners of common shares assume this uncertainty in the hope of favourable returns. What is the argument for issuing ..

  What is the YTM of the bond

Norma has one share of stock and one bond. The total value of the two securities is 1,466.4 dollars. The stock pays annual dividends. The next dividend is expected to be 5.37 dollars and paid in one year. In two years, the dividend is expected to be ..

  Not-for-profit health care organizations

Not-for-profit health care organizations: What are revenues, gain, and other support? What are expenses and losses?

  What is the effective cost of borrowing in case

Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?

  What is the standard deviation of the returns on this stock

The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probabilit..

  What is premium or discount if shares are currently selling

A closed-end fund has total assets of $379 million and liabilities of $640,000. there are 36 million shares outstanding. what is the premium or discount if the shares are currently selling for $9.85 each?

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