Question
In: Finance
Use the following information to answer Questions 9 and 10: An analyst gathered the following information...
Use the following information to answer Questions 9 and 10: An analyst gathered the following information regarding Beta Corporation: •Current dividend per share = $2.18 •Next year's expected dividend growth rate of 30% is expected to decline linearly over the following 8 years to a long-term constant growth rate of 6%. •Required rate of return on the company's stock is 11%.
Question: The value of the company's stock today is closest to: Select one: a. $41.86 b. $98.54 c. $88.07
Question text What proportion of the stock's value is attributable to the extraordinary growth? Select one: a. 41.86% b. 42.47% c. 47.52%
Solutions
Expert Solution
lINEARLY DECREASING GROWTH RATE = (20-6) / 10 = 2.6. So, decrease rate by 2.4 % every year till it reaches 6%
| 30% | 27.60% | 25.20% | 22.80% | 20.40% | 18.00% | 15.60% | 13.20% | 10.80% | 8.40% | 6.00% | ||
| Year 0 | year 1 | year 2 | year 3 | year 4 | year 5 | year 6 | year 7 | year 8 | year 9 | year 10 | year 11 | |
| Dividend Per share | 2.18 | 2.83 | 3.62 | 4.53 | 5.56 | 6.69 | 7.90 | 9.13 | 10.34 | 11.45 | 12.41 | 13.16 |
| 263.1909 | TV AT YEAR 10 | |||||||||||
| Dividend + tv | 2.18 | 2.834 | 3.616184 | 4.527462 | 5.559724 | 6.693907 | 7.898811 | 9.131025 | 10.33632 | 11.45264 | 275.6056 | |
| NPV | 36.20 |
jeff jeffy answered 1 year agoRelated Solutions
i dont know questions 9 and 10 Use the following information to answer the next six...
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Use the following information to answer the next six
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All balances are as of 12/31/2017 unless specified
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Loss on the Sale of Equipment
62,250
Income Tax Expense
48,750
Short Term Investments
1,500
Inventory
97,500
Retained Earnings, 1/1/17
281,000
Gain on Sale of Equipment
27,500
Goodwill
50,000
Cost of Goods Sold
204,000
Common Stock
???
Notes Payable 5/1/18
12,500
Cash
70,000
Sales Revenue
447,500
Accumulated Depreciation
50,000
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1
2
3
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1
0.15
0.02
0.02
0.19
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0.08
0.25
0.05
0.38
3
0.08
0.05
0.3
0.43
0.31
0.32
0.37
1
9. What is the marginal...
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Physician 2
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34
33
17
28
25
35
30
33
27
31
30
31
31
31
26
27
26
42
32
32
34
33
28
33
21
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29
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[The following information applies to the questions
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The following information is available for Lock-Tite Company, which
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April 30
May 31
Inventories
Raw materials
$
31,000
$
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9,500
18,200
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54,000
34,000
Activities and information for
May
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note: all sales are credit sales
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2016
2017
Sales
$ 975,000
$ 1,072,500
less Cost of Goods Sold:
325,000
346,125
Gross Profit
650,000
726,375
Operating Expenses
575,000
609,500
Earnings before Interest & Taxes
75,000
116,875
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25,000
31,000
earnings before Taxes
50,000
85,875
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20,000
34,350
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$
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12/31/2016
12/31/2017
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60,000
$ 63,600
Accounts Receivable
80,000
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