Question

In: Finance

2. Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for...

2. Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.35 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22 percent, what is the current value of the stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

Current value​​​​​​​ $

Solutions

Expert Solution

Current value $25.79
Statemnet showing Current Price
Particulars Time PVf 22% Amount PV
Cash inflows (Dividend)                            1.00            0.8197                   2.3500                        1.93
Cash inflows (Dividend)                            2.00            0.6719                   3.0550                        2.05
Cash inflows (Dividend)                            3.00            0.5507                   3.9715                        2.19
Cash inflows (Dividend)                            4.00            0.4514                   4.6467                        2.10
Cash inflows (Dividend)                            5.00            0.3700                   5.4366                        2.01
Cash inflows (Price)                          5.00            0.3700                 41.9394                     15.52
Current Price of Stock                     25.79
P5= D6/ke-g
P5 = 5.4366*1.08/(22%-8%)
P5 = 5.8715/(14%)
P5 = 41.9394

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

2. Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for...
2. Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.35 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22...
Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the...
Wildhorse, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.45 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 21 percent,...
Ivanhoe, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the...
Ivanhoe, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.63 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 17 percent,...
Sheridan, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the...
Sheridan, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.75 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 15 percent,...
Blossom, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the...
Blossom, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.25 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 15 percent,...
Carla Vista, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for...
Carla Vista, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.26 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22...
Nonconstant growth: Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent...
Nonconstant growth: Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.45 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (effecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 7 percent per year and last indefinitely. If GRF just paid a $2.00 dividend and the appropriate discount rate is 15 percent, then what is the value of a share of GRE? SOLUTION Excel
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (affecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 2.4 percent per year and last indefinitely. If GRF just paid a $4.00 dividend and the appropriate discount rate is 17.5 percent, then what is the value of a share of GRF? Enter your answer to two decimal places.
Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend...
Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend of $7.10. You believe that dividends will grow at a rate of 16.0% per year for two years, and then at a rate of 10.0% per year thereafter. You expect the stock will sell for $40.42 in two years. You expect an annual rate of return of 23.0% on this investment. If you plan to hold the stock indefinitely, what is the most you...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT