Wineries stores has forecast a high growth rate of 40 per cent for the next 2...

Wineries stores has forecast a high growth rate of 40 per cent for the next 2 years, followed by growth rates of 25 per cent and 20 per cent for the following 2 years. It then expects to stabilise its growth to a constant rate of 7.5 per cent for the next several years. The company paid a dividend of $3.80 recently. If the required rate of return is 15 per cent, what is the current market price of the share?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Trentham Estate Ltd expects to grow at a rate of 22 per cent for the next 5 years and then settle to a constant-growth rate of 6 per cent.

Trentham Estate Ltd expects to grow at a rate of 22 per cent for the next 5 years and then settle to a constant-growth rate of 6 per cent.The company’s most recent dividend was $2.35.The required rate of return is 15 per cent.a Find the present value of the dividends during the rapid growth period.b What is the price of the share at the end of year 5?c What is the price of the share today?

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year....

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. The current financial statements are shown here: Income Statement Sales $ 32,300,000 Costs 26,971,600 Taxable income $ 5,328,400 Taxes 1,864,940 Net income $ 3,463,460 Dividends $ 1,385,384 Addition to retained earnings 2,078,076 Balance Sheet Assets Liabilities and Equity Current assets $ 7,390,000 Short-term debt $ 6,460,000 Long-term debt 2,584,000 Fixed assets 17,804,000 Common stock $ 4,306,000 Accumulated retained earnings...

The Optical Scam Company has forecast an 20 percent sales growth rate for next year. The...

The Optical Scam Company has forecast an 20 percent sales growth rate for next year. The current financial statements are shown below. Current assets, fixed assets, and short-term debt are proportional to sales. INCOME STATEMENT Sales $ 35,000,000 Costs 27,100,000 Taxable income $ 7,900,000 Taxes 2,765,000 Net income $ 5,135,000 Dividends $ 1,027,000 Additions to retained earnings $ 4,108,000 BALANCE SHEET Assets Liabilities and Equity Current assets $ 9,800,000 Short-term debt $ 5,600,000 Long-term debt 6,100,000 Fixed assets...

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year....

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here: INCOME STATEMENT Sales $ 31,000,000 Costs 26,367,600 Taxable income $ 4,632,400 Taxes 1,621,340 Net income $ 3,011,060 Dividends $ 1,204,424 Addition to retained earnings 1,806,636 BALANCE SHEET Assets Liabilities and Equity Current assets $ 7,260,000 Short-term debt $ 8,060,000 Long-term debt 1,588,750 Fixed assets...

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year....

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here: INCOME STATEMENT Sales $ 32,400,000 Costs 28,531,000 Taxable income $ 3,869,000 Taxes 1,354,150 Net income $ 2,514,850 Dividends $ 1,005,940 Addition to retained earnings 1,508,910 BALANCE SHEET Assets Liabilities and Equity Current assets $ 7,400,000 Short-term debt $ 7,128,000 Long-term debt 3,969,000 Fixed assets...

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year....

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. The current financial statements are shown here: Income Statement Sales $ 31,500,000 Costs 26,641,500 Taxable income $ 4,858,500 Taxes 1,700,475 Net income $ 3,158,025 Dividends $ 1,263,210 Addition to retained earnings 1,894,815 Balance Sheet Assets Liabilities and Equity Current assets $ 7,310,000 Short-term debt $ 5,985,000 Long-term debt 4,130,000 Fixed assets 19,780,000 Common stock $ 4,080,000 Accumulated retained earnings...

The Optical Scam Company has forecast an 17 percent sales growth rate for next year. The...

The Optical Scam Company has forecast an 17 percent sales growth rate for next year. The current financial statements are shown below. Current assets, fixed assets, and short-term debt are proportional to sales. INCOME STATEMENT Sales $ 44,000,000 Costs 35,200,000 Taxable income $ 8,800,000 Taxes 3,080,000 Net income $ 5,720,000 Dividends $ 1,430,000 Additions to retained earnings $ 4,290,000 BALANCE SHEET Assets Liabilities and Equity Current assets $ 14,040,000 Short-term debt $ 10,560,000 Long-term debt 11,060,000 Fixed assets 37,000,000 Common...

High Growth Period: Growth rate during period = 10% Payout rate during period = 40% Stable...

High Growth Period: Growth rate during period = 10% Payout rate during period = 40% Stable Growth Period: Growth rate during period = -1% Payout rate during period = 80% Please assume all other inputs remain unchanged. Please show your work. There are two stocks. Assume a capitalization rate of 10%. Stock A is expected to pay a dividend of $15 next year. Thereafter, dividend growth is expected to be -2% per annum forever (note that dividends are declining). Stock...

Firm B has an expected EBIT of £40,000 in perpetuity and a tax rate of 28 per cent. The firm has £50,000 in outstanding debt at an interest rate of 6 per cent, and its unlevered cost of capital is 12 per cent.

Firm B has an expected EBIT of £40,000 in perpetuity and a tax rate of 28 per cent. The firm has £50,000 in outstanding debt at an interest rate of 6 per cent, and its unlevered cost of capital is 12 per cent.Required:(i) What is the value of the firm according to Modigliani and Miller (M&M) Proposition I with taxes?(ii) Should firm B change its debt–equity ratio if the goal is to maximize the value of the firm? Explain.

The Optical Scam Company has forecast a sales growth of 25 percent for next...

The Optical Scam Company has forecast a sales growth of 25 percent for next year. The current financial statements are shown here: Income Statement Sales $ 32,000,000 Costs 26,309,400 Taxable income $ 5,690,600 Taxes 1,991,710 Net income $ 3,698,890 Dividends $ 1,479,556 Addition to retained earnings 2,219,334 Balance Sheet Assets Liabilities and Owners' Equity Current assets $ 7,360,000 Accounts payable $ 7,040,000 Long-term debt 2,240,000 Fixed assets 18,560,000 Common stock $ 6,070,000 Accumulated retained earnings 10,570,000...

Subjects