Question
In: Finance
University Dry Cleaners has been growing at a rate of 19% per year in recent years....
University Dry Cleaners has been growing at a rate of 19% per
year in recent years. This same growth rate is expected to last for
another 3 years,then decline to g(n)=7%
a. If Do=$180 and r(s)=10%,what is Calle Ochoa stock worth
today?
Terminal value-?
Value of stock today-?
Solutions
Expert Solution
| Calculation of stock's current price: | ||||
| Year | Particulars | Amount | PVF @10% | Present value |
| 1 | Dividend | 214.20 | 0.909 | 194.73 |
| 2 | Dividend | 254.90 | 0.826 | 210.66 |
| 3 | Dividend | 303.33 | 0.751 | 227.90 |
| 3 | Terminal value | 10,818.77 | 0.751 | 8,124.90 |
| Total | 8,758.18 | |||
| So terminal value is $10818.77 | ||||
| So value of stock is $8758.18 | ||||
| Working: | ||||
| Calculation of dividend: | ||||
| Year 1= Dividend= 180(1+0.19)=$214.20 | ||||
| Year 2= Dividend= 214.20(1+0.19)=$254.90 | ||||
| Year 3= Dividend= 254.90(1+0.19)=$303.33 | ||||
| Terminal value= Dividend(1+growth)/(return-growth) | ||||
| =303.33(1+0.07)/(0.010-0.07) | ||||
| =10818.77 | ||||
jeff jeffy answered 3 years agoRelated Solutions
XYZ has been growing at a rate of 30% per year in recent years. This same...
XYZ has been growing at a rate of 30% per year in recent years.
This same supernormal growth is expected to last for another two
years (30% for Year 0 to Year 1 and Year 1 to Year 2), then at a
constant rate of 10% thereafter.
a. If D0 = RM1.80, rs = 12%, then what is XYZ’s stock worth
today? What is the expected dividend yield and its capital gains
yield at this time?
Taussig Technologies Corporation (TTC) has been growing at a rate of 14% per year in recent...
Taussig Technologies Corporation (TTC) has been growing at a
rate of 14% per year in recent years. This same growth rate is
expected to last for another 2 years, then decline to gn
= 8%.
If D0 = $2.70 and rs = 9%, what is TTC's
stock worth today? Do not round intermediate calculations. Round
your answer to the nearest cent.
$
What is its expected dividend yield at this time, that is, during
Year 1? Do not round intermediate...
Conroy Consulting Corporation (CCC) has been growing at a rate of 27% per year in recent...
Conroy Consulting Corporation (CCC) has been growing at a rate
of 27% per year in recent years. This same nonconstant growth rate
is expected to last for another 2 years (g0,1 =
g1,2 = 27%).
-Select-IIIIIIIVV
-Select-IIIIIIIVVItem 4
If D0 = $1.10, rs = 13% and gL
= 7%, then what is CCC's stock worth today? Do not round
intermediate calculations. Round your answer to the nearest
cent.
$
What is its expected dividend yield for the first year? Do...
Conroy Consulting Corporation (CCC) has been growing at a rate of 30% per year in recent...
Conroy Consulting Corporation (CCC) has been growing at a rate
of 30% per year in recent years. This same nonconstant growth rate
is expected to last for another 2 years (g0,1 = g1,2 = 30%) (10
points)
a. If D0 = $2.50, r0 = 12%, and g1 = 7%, then what is CCC’s
stock worth today? What are its expected dividend yield and capital
gains yield at this time?
b. Now assume that CCC’s period of nonconstant growth is to...
Taussig Technologies Corporation (TTC) has been growing at a rate of 12% per year in recent...
Taussig Technologies Corporation (TTC) has been growing at a
rate of 12% per year in recent years. This same growth rate is
expected to last for another 2 years, then decline to gn
= 7%.
If D0 = $2.00 and rs = 12%, what is TTC's
stock worth today? Do not round intermediate calculations. Round
your answer to the nearest cent.
$
What is its expected dividend yield at this time, that is, during
Year 1? Do not round intermediate...
Taussig Technologies Corporation (TTC) has been growing at a rate of 12% per year in recent...
Taussig Technologies Corporation (TTC) has been growing at a
rate of 12% per year in recent years. This same growth rate is
expected to last for another 2 years, then decline to gn
= 4%.
If D0 = $1.30 and rs = 10.00%, what is
TTC's stock worth today? Round your answer to the nearest cent. Do
not round your intermediate calculations.
$
What is its expected dividend yield at this time, that is,
during Year 1? Round your answer...
Consider an imaginary economy that has been growing at a rate of 4% per year. Government...
Consider an imaginary economy that has been growing at a rate of
4% per year. Government economists have proposed a number of
policies to increase the growth rate but first need to convince the
President that the policies will pay off. To do so, they want to
present a comparison of the number of years it will take for the
economy to double, depending on the growth rate.
According to the rule of 70, determine the number of years it...
Consider an imaginary economy that has been growing at a rate of 3% per year. Government...
Consider an imaginary economy that has been growing at a rate of
3% per year. Government economists have proposed a number of
policies to increase the growth rate but first need to convince the
president that the policies will pay off. To do so, they want to
present a comparison of the number of years it will take for the
economy to double, depending on the growth rate.
Using the rule of 70, determine the number of years it will...
A firm has been growing at 20% per year, and you expect this growth rate will...
A firm has been growing at 20% per year, and you expect this
growth rate will continue for another 3 years. After that it will
face more competition and slip into a constant growth rate of 5%
forever. If the discount rate is 10% and last dividend paid was
$3.
(a) What will the next dividend be?
(b) What is the expected price of the stock 3 years from now?
(c) What should the stock price be today?
Lite Events has been growing at a rate of 20% per year, and you expect this...
Lite Events has been growing at a rate of 20% per year, and you
expect this growth rate in earnings and dividends to continue for
another 4 years. The last dividend paid was $2, and if the steady
(i.e., constant) growth rate after 4 years is 5%, what should the
stock price be today? Assume that the stock has a beta of 2.0,
Treasury bills yield 3%, and the market risk premium is 6%.
*work please
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain two theories or frameworks for understanding how Western Europe emerged out of 1,000 years of...
- Two cannons are mounted as shown in the drawing and rigged to fire simultaneously. They are...
- What is the potential of a cell made up of Zn|Zn2+ and Cu|Cu2+ half-cells at 25o...
- Write a Java Program using the following instruction: Create the following 3 methods that calculate and...
- How would the S/D curves shift if a $3 tax was imposed on suppliers for each...
- Why should a time-based authentication system invalidate the current password on a successful authentication?
- Explain the difference between a market penetration strategy and a market development strategy.
ADVERTISEMENT