Question

In: Finance

What is the price of stock, today, if the following information is provided Your required rate...

What is the price of stock, today, if the following information is provided Your required rate of return = 18% Dividends in one year = $       2.00 The entity's sustained growth rate is 12% What would be the value of a corporation generating $150k per year in cash flow? The corporation is to valued as a perpetuity using a 12% required rate of return.

Solutions

Expert Solution

1) Current price of stock = D1/(ke-g) Where,
= 2.00/(18%-12%) D1 $       2.00
= $       33.33 Ke 18%
g 12%
2) Value of corporation = Cash flow / Required rate of return
= $           150 k / 12%
= $       1,250 k

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

An investor obtains the following information: • Stock price today = $120 • Stock price one...
An investor obtains the following information: • Stock price today = $120 • Stock price one year from today can take two values: $110 or $130 • Exercise price = $120 • Risk free interest rate = 5% per annum What should be the price of a put option on the given stock under these conditions (use discrete discounting)?
Given the following information, what is TODAY’s stock price? Today’s Dividend = $3.18 Expected Growth rate...
Given the following information, what is TODAY’s stock price? Today’s Dividend = $3.18 Expected Growth rate in dividends = 2.89 Discount Rate (Required return) = 6.63 Calculate your answer to the nearest penny (e.g., 2.51)
In the following, S0 is the stock price in dollars as of today, K is the...
In the following, S0 is the stock price in dollars as of today, K is the strike price in dollars, r is the continuously-compounded risk-free interest (as a decimal), q is the continuous dividend yield (as a decimal), sigma is the volatility (as a decimal) and T is the time to maturity in years. Compute option prices in dollars for the following types of options and the following parameter values with a three step binomial tree. A. S0 = 100,...
Required information [The following information applies to the questions displayed below.] The following data is provided...
Required information [The following information applies to the questions displayed below.] The following data is provided for Garcon Company and Pepper Company. Garcon Company Pepper Company Beginning finished goods inventory $ 12,600 $ 17,500 Beginning work in process inventory 18,000 20,550 Beginning raw materials inventory (direct materials) 7,400 12,150 Rental cost on factory equipment 30,500 24,700 Direct labor 21,200 41,000 Ending finished goods inventory 17,150 14,100 Ending work in process inventory 25,900 20,200 Ending raw materials inventory 7,100 7,600 Factory...
Required information [The following information applies to the questions displayed below.] The following data is provided...
Required information [The following information applies to the questions displayed below.] The following data is provided for Garcon Company and Pepper Company. Garcon Company Pepper Company Beginning finished goods inventory $ 12,600 $ 17,500 Beginning work in process inventory 18,000 20,550 Beginning raw materials inventory (direct materials) 7,400 12,150 Rental cost on factory equipment 30,500 24,700 Direct labor 21,200 41,000 Ending finished goods inventory 17,150 14,100 Ending work in process inventory 25,900 20,200 Ending raw materials inventory 7,100 7,600 Factory...
Required information [The following information applies to the questions displayed below.] The following data is provided...
Required information [The following information applies to the questions displayed below.] The following data is provided for Garcon Company and Pepper Company. Garcon Company Pepper Company Beginning finished goods inventory $ 12,700 $ 19,600 Beginning work in process inventory 18,800 22,800 Beginning raw materials inventory 7,200 13,200 Rental cost on factory equipment 31,500 24,100 Direct labor 20,800 37,800 Ending finished goods inventory 19,250 13,100 Ending work in process inventory 23,800 21,400 Ending raw materials inventory 6,300 9,800 Factory utilities 10,950...
Required information [The following information applies to the questions displayed below.] The following data is provided...
Required information [The following information applies to the questions displayed below.] The following data is provided for Garcon Company and Pepper Company. Garcon Company Pepper Company Beginning finished goods inventory $ 14,200 $ 17,350 Beginning work in process inventory 15,600 23,400 Beginning raw materials inventory 7,300 11,550 Rental cost on factory equipment 29,750 24,400 Direct labor 24,800 41,400 Ending finished goods inventory 20,900 16,200 Ending work in process inventory 22,300 16,600 Ending raw materials inventory 6,400 7,400 Factory utilities 14,250...
Required information [The following information applies to the questions displayed below.] The following data is provided...
Required information [The following information applies to the questions displayed below.] The following data is provided for Garcon Company and Pepper Company. Garcon Company Pepper Company Beginning finished goods inventory $ 12,700 $ 16,600 Beginning work in process inventory 18,000 23,550 Beginning raw materials inventory 11,500 13,350 Rental cost on factory equipment 27,250 26,950 Direct labor 20,600 43,000 Ending finished goods inventory 20,000 13,500 Ending work in process inventory 25,300 17,200 Ending raw materials inventory 6,200 8,000 Factory utilities 11,550...
Which of the following information is not provided by the financial markets? ____ A)The price of...
Which of the following information is not provided by the financial markets? ____ A)The price of six ounces of gold B)The earnings of Microsoft in 2017 C)The cost of borrowing $500,000 for five years D)The cost of wiring ¥1,000,000 to Japan
Required information [The following information applies to the questions displayed below.] The following data were provided...
Required information [The following information applies to the questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: Cost of Goods Sold $ 156,000 Income Tax Expense 15,120 Merchandise Sales (gross revenue) for Cash 222,000 Merchandise Sales (gross revenue) on Credit 38,400 Office Expenses 18,100 Sales Returns and Allowances 6,510 Salaries and Wages Expense 36,600 2-a. What was the amount of gross profit? 2-b. What was the gross profit percentage? (Round your percentage...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT