1 Nonconstant Growth and Corporate Valuation23 Last dividend, Do4 Required rate of return, re5 Supernormal growth rate. gs6 Normal growth rate, gn7 Period of supermormal growth814 Horizon value at the end of year 215 Stock price16 Dividend yield during year 117 Capital gains yield during year 19a. Finding TTC's stock worth today, its expected dividend, and capital gains yields10DividendFormulasYear12Ready19 b. Finding the price, dividend yield, and capital gains yield20 Period of supernormal growth5 years$1.109%20%Year1Sheet1Accessibility Good to go62°FPartly sunny2 yearsDividendCQ SearchD#N/A#N/A#N/A#N/A#N/AEFAGHIK#

To calculate Dividends for Year 1 and Year 2:Year 1 Dividend = Last Dividend (1 + Normal Growth…

Answered: a. Finding TTC's stock worth today, its…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 12P

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b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect its price, dividend, yield, and capital gains yield? 1. Find the price today. D₂ 2 2 Year Dividend PV of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $1.60 10.0% $59.5547+ $70.0197 - P Dividend yield- Dividend yield- Dividend yield $1.60 Part 2. Finding the expected dividend yield. Dividend yield- Dividend yield- Dividend yield- D₁ $1.920 2.74% Short-run g; for Years 1-5 only. Long-run g; for Year 6 and all following years. 10.0% 7.26% $1.92 Part 3. Finding the expected capital gains yield. Cap. Gain yield-Expected return Cap. Gain yield Cap. Gain yield- Cap. Gain yield Expected return Cap. Gain yield Cap. Gain yield 1 $2.30 " 1 P₁ $70.020 105.5048 Terminal value = Ps= Dividend yield 2.74% 3 $2.76 P. 4 $3.32 Dividend yield 5 $3.98 4.2202 c. What will be TTC's dividend yield and capital gains yield once its period of supernormal growth ends? We used the 5 year…
36.Given the following possible returns (dividends plus capital gains) over the coming year from P100,000 investment in General Motors common stock: State of Economy Profitability ReturnRecession 0.20 P-1,000 Normal year 0.60 1,500Boom 0.20 2,500What is the expected return?
Q#: Suppose a company estimates following one year returns from investing in the common stock of Leopard Corporation: Possibility of Occurrence .1 .25 .1 .15 .1 .2 .1 Possible returns 15% 30% 15% -10% -5% 20% 10% Required: Calculate Expected return & Risk {Standard Deviation)
Q36 A stock that just gave a dividend of OMR 1.545 and long-term annual growth rate of the company is 3%. If the Investors required rate of return (Ke) of 8% from such stock, then how much is the market price of the stock? a. OMR18.75 b. OMR 31.827 c. OMR 30.9 d. OMR 30
Calculate the intrinsic value of Rio Tinto in each of the following scenarios by using the three-stage growth model of Spreadsheet 18.1. Treat each scenario independently. a. The terminal growth rate will be 10.30%. (Round your answer to 2 decimal places.) Intrinsic value b. Rio Tinto's actual beta is 1.05. (Round your answer to 2 decimal places.) Intrinsic value c. The market risk premium is 9.50%. (Round your answer to 2 decimal places.) Intrinsic value
For Company ABC, if stock price P0 = $30; dividend paid at the end of period 1 D1 = $3.00; growth rate g = 5%; What’s the required rate of return for equity holder rs = ? If the flotation cost F = 10%; What’s the required rate of return for equity holder rs = ?
Expected Return of Common Stock Wooster Inc. has common stock with a market price of $120 per share. We expect the next dividend to be $9 and the constant growth rate to be 4% Calculate the following: Expected return (Total yield) Dividend yield Capital gain or loss yield b.
Example: Stock Valuation Consider the following information for the company Fledgling Electronics: Expected earnings per share at the end of year $8.33 Expected dividend per share at the end of year $5 Market capitalization rate (r) 15% Expected growth rate dividends (per year) 10% 1. Calculate the current price per share of Fledgling Electronics 2. Calculate the capitalized value of Fledgling's EPS if it had a no growth policy 3. Calculate the present value of Fledgling's growth opportunities
Problem 2. The stock of Business Adventures sells for $40 a share. Its likely dividend payout at the end-of-year price depends on the state of the economy by the end of the year as follows: State of the Economy Stock Price Recession Normal Growth Boom $34 $43 $50 Dividend $ 0.50 $ 1.00 $ 2.00 (a) Calculate the expected holding-period return and standard deviation of the return. All three scenarios are equally likely. (b) Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury Bills. The return on Treasury Bills is 4%. = (c) Assume your utility function is U(u, o) = μ-302. How much would you invest in the stock and how much would you invest in T-Bills?
Subject: Financial strategy & policy Question No 3 (part i) Answer the following. i) The future earnings, dividends, and common stock price of Nabeel Inc. are expected to grow 7% per year. Common stock currently sells for $23.00 per share; its last dividend was $2.00. a) Using the DCF approach, what is its cost of common equity? b) If the firm’s beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm’s cost of common equity using the CAPM approach? c) If the firm’s bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? d) If you have equal confidence in the inputs used for the three approaches, what is your estimate of cost of common equity?
Question 3XYZ company has just paid a dividend of $1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future.a) Calculate the current stock value using the Gordon Constant growth model. b) Evaluate Gordons growth model and explain its limitations and why in certain situations the growth model used in part (a) will create incorrect results?
Particulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate Not Tavailable 3395 Not available 3953 Not 427.30 available 420.35 1 96.5

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