Question

In: Finance

Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C...

Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C retention ratio is 65%. Firm C current net income is $2millions with 500,000 shares outstanding. The net income is expected to grow by 1% during the next 4 years. The dividends are expected to grow during year 5 by 11.5% and during year 6 by 9.5%. From year 6 to year 14 they is no expected growth in dividends. However starting from year 15 there will be a constant dividend growth rate of 5% forever. The required rate of return on the stocks is 8%. a/ Compute the intrinsic value of the stock now? (Show your steps) b/ Compute the intrinsic value of the stock at the end of year 2? (Show your steps) c/ Compute the intrinsic value of the stock at the end of year 8? (Show your steps) d/ Compute the intrinsic value of the stock at the end of year 14? (Show your steps)

Solutions

Expert Solution


Related Solutions

Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C...
Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C retention ratio is 65%. Firm C current net income is $2millions with 500,000 shares outstanding. The net income is expected to grow by 1% during the next 4 years. The dividends are expected to grow during year 5 by 11.5% and during year 6 by 9.5%. From year 6 to year 14 they is no expected growth in dividends. However starting from year 15...
Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C...
Question 3/ Firm C is planning its first dividend in 4 years from now. Firm C retention ratio is 65%. Firm C current net income is $2millions with 500,000 shares outstanding. The net income is expected to grow by 1% during the next 4 years. The dividends are expected to grow during year 5 by 11.5% and during year 6 by 9.5%. From year 6 to year 14 they is no expected growth in dividends. However starting from year 15...
Question 4/ Firm D is planning its first dividend in 3 years from now. The dividend...
Question 4/ Firm D is planning its first dividend in 3 years from now. The dividend per share by the end of year 3 is $1.4. Firm C has an equity Beta of 1.2. The T-bill rate is 2.5% and the return on the equity market index is 7.5%. The dividends are expected to grow from year 3 to years 6 by 13.5% and during year 6 by 9.5%. From year 6 to year 11 they are expected to grow...
Question 1 Alphabet Inc. will not pay it's first dividend until ten years from now. The...
Question 1 Alphabet Inc. will not pay it's first dividend until ten years from now. The first dividend received in 10 years (Year 10) is expected to be $120. Dividends are expected to grow at 4% forever after this first dividend payment. The required rate of return for similar stocks is 15%. What is the current value of Alphabet, Inc. stock? Question 2 Snoke Inc's will pay a dividend of $10 next year. The required rate of return is 10%...
Question 1 Alphabet Inc. will not pay it's first dividend until ten years from now. The...
Question 1 Alphabet Inc. will not pay it's first dividend until ten years from now. The first dividend received in 10 years (Year 10) is expected to be $120. Dividends are expected to grow at 4% forever after this first dividend payment. The required rate of return for similar stocks is 15%. What is the current value of Alphabet, Inc. stock? Question 2 Snoke Inc's will pay a dividend of $10 next year. The required rate of return is 10%...
Jimmy deposits $4,000 now, $2,500 3 years from now, and $5,000 6 years from now. Interest...
Jimmy deposits $4,000 now, $2,500 3 years from now, and $5,000 6 years from now. Interest is 5% for the first 3 years and 7% for the last 3 years. a) What is the uniform series equivalent of the fund (uniform cash flow at end of years 1 through 6)?
(perpetuity) - first dividend of $10 per share is planned 3 years from today. - after...
(perpetuity) - first dividend of $10 per share is planned 3 years from today. - after that dividends will decline at 5% p.a. for next two years, and then grow at rate of 3% p.a. - dividends paid annualy - required rate of return is 0.5/fornight ask: how many shares need to sell to raise $500000
IBM will pay its first dividend of 1.00, two years from today. The dividends will grow...
IBM will pay its first dividend of 1.00, two years from today. The dividends will grow at a rate of 5% per annum until the 7th year. After that, the dividends will grow at a rate of 3% until the end of the 15th year.After that the dividends will grow at a rate of 2% forever. Of return of IBM stock is 10% per annual what should be the Pv of the stock?
A firm is planning its next year's dividend payout. The firm forecasts net income of $12.6M...
A firm is planning its next year's dividend payout. The firm forecasts net income of $12.6M next year.   It anticipates a capital budget of $7.3M next year. It keeps a debt ratio of 35% a) How much would the company pay in dividends next year if it follows a residual dividend policy? b) Suppose the firm pays $2.6M in dividends THIS year. In a concise sentence, explain why the company might choose to pay something closer to this number instead,...
Jimmy deposits : $ 4,200 - now, $ 2,100 - 3 years from now, and $...
Jimmy deposits : $ 4,200 - now, $ 2,100 - 3 years from now, and $ 4,200 - 6 years from now. Interest is 3 % for the first 3 years and 11 % for the last 3 years. What is the uniform series equivalent of the fund (uniform cash flow at end of years 1–6)? (Hint : Incorrect Answer = $3456)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT