Question

In: Finance

Consider a firm that had been priced using a 10.00 percent growth rate and a 15.00...

Consider a firm that had been priced using a 10.00 percent growth rate and a 15.00 percent required rate. The firm recently paid a $1.30 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 12.00 percent rate. How much should the stock price change (in dollars and percentage)?

Multiple Choice

  • $16.00, 100.00%

  • $16.00, 1.00%

  • $19.93, 70.00%

  • $19.93, .70%

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE


Related Solutions

Changes in Growth and Stock Valuation Consider a firm that had been priced using a 10...
Changes in Growth and Stock Valuation Consider a firm that had been priced using a 10 percent growth rate and a 13 percent required rate. The firm recently paid a $2.20 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 11 percent rate. How much should the stock price change (in dollars and percentage)? $19.43, 16% $41.43, 51% $41.43, 34% $19.43, 628%
A firm wishes to maintain an internal growth rate of 9.1 percent and a dividend payout...
A firm wishes to maintain an internal growth rate of 9.1 percent and a dividend payout ratio of 40 percent. The current profit margin is 8.9 percent, and the firm uses no external financing sources. What must total asset turnover be? (round 4 decimal places)
A firm wishes to maintain an internal growth rate of 9.3 percent and a dividend payout...
A firm wishes to maintain an internal growth rate of 9.3 percent and a dividend payout ratio of 39 percent. The current profit margin is 6.4 percent, and the firm uses no external financing sources. What must total asset turnover be?
Compute Simpson Inc's internal growth rate if the firm has an ROA of 15 percent and...
Compute Simpson Inc's internal growth rate if the firm has an ROA of 15 percent and a payout ratio of 23 percent. Multiple Choice 11.23% 13.06% 3.57% 15.15% 14.89%
Compute Simpson Inc's internal growth rate if the firm has an ROA of 15 percent and...
Compute Simpson Inc's internal growth rate if the firm has an ROA of 15 percent and a payout ratio of 23 percent. Multiple Choice 11.23% 13.06% 3.57% 15.15% 14.89%
Using the Quantity Theory of Money, calculate the inflation rate if money growth is 14 percent,...
Using the Quantity Theory of Money, calculate the inflation rate if money growth is 14 percent, velocity is 2 percent and real GDP is minus 7 percent. Given your results, is it possible to have higher inflation and lower real economic growth? How might this explain the German hyperinflation/depression of the early 1920s? Today U.S. money growth is 12% and real GDP is down 4%, if velocity is at 2%, what is your outlook for inflation? Implications for the real...
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?
Assume the population growth rate is 2 percent and thereal GDP growth rate is 5...
Assume the population growth rate is 2 percent and the real GDP growth rate is 5 percent. The change in standard of living, as measured by the growth rate in real GDP per person, isA) 7 percent.B) 2.5 percent.C) 5 percent.D) 3 percent.E) -3 percent.
The rate of growth of nominal GDP is 10 percent. The rate of inflation rate is...
The rate of growth of nominal GDP is 10 percent. The rate of inflation rate is 5 percent. The rate of growth of the population is 1%. What is the rate of growth or real GDP per capita? (b) What is the problem with using GDP (and GDP per capita) as a measure of economic performance and welfare?
24. The sustainable growth rate of a firm is best described as the minimum growth rate...
24. The sustainable growth rate of a firm is best described as the minimum growth rate achievable, assuming a 100 percent retention ratio. minimum growth rate achievable if the firm maintains a constant equity multiplier. maximum growth rate achievable, excluding external financing of any kind. maximum growth rate achievable, excluding any external equity financing while maintaining a constant debt-equity ratio. maximum growth rate achievable with unlimited debt financing. None of the options are correct. 25. Which of the following statements...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT