Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $3.74 per share dividend 10 years from today and will increase the dividend by 4.55 percent per year thereafter. If the required return on this stock is 8.38 percent, what is the current share price?

Expert Solution

rate	8.3800%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year
-	0	-
-	1	-
-	2	-
-	3	-
-	4	-
-	5	-
-	6	-
-	7	-
-	8	-
97.65	9	47.33

terminal value = 3.74/(0.0838 - 0.0455) = 97.65

price of share = 47.33

jeff jeffy answered 2 years ago

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...

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Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $10 per share exactly 10 years from today and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price?

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Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $6 per share 11 years from today and will increase the dividend by 8 percent per year thereafter. If the required return on this stock is 13 percent, what is the current share price? Multiple Choice $35.35 $36.41 $33.58...

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Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...

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