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.D₂22YearDividendPV of dividends$1.7455$1.9041$2.0772$2.2661$2.4721$1.6010.0%$59.5547+$70.0197 - PDividend yield-Dividend yield-Dividend yield$1.60Part 2. Finding the expected dividend yield.Dividend yield-Dividend yield-Dividend yield-D₁$1.9202.74%Short-run g; for Years 1-5 only.Long-run g; for Year 6 and all following years.10.0%7.26%$1.92Part 3. Finding the expected capital gains yield.Cap. Gain yield-Expected returnCap. Gain yieldCap. Gain yield-Cap. Gain yield Expected returnCap. Gain yieldCap. Gain yield1$2.30"1P₁$70.020105.5048 Terminal value = Ps=Dividend yield2.74%3$2.76P.4$3.32Dividend yield5$3.984.2202c. What will be TTC's dividend yield and capital gains yield once its period of supernormal growth ends?We used the 5 year supernormal growth scenario for this calculat but ultimately it does not matterwhich example you use, as they both yield the same result.Da+6%to$4.22-F.-BUpon reflection, we see that these calculations were unnecessary because the constant growth assumptionholds that the long-term growth rate is the dividend growth rate and the capital gains yield, hence we couldhave simply subtracted the long-run growth rate from the required return to find the dividend yield.

Given: Current dividend(D0) $1.60 Required return (rs) 10% Short term growth rate (gs) 20%…

How would this affect its price, dividend, yield, and capital gains yield? Find the price today. D₂ Year Dividend "V of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $59.5547 $70.0197 $1.60 10.0% 20% $1.60 D $1.920 2.74% Short-rung; for Years 1-5 only. Long-run g; for Year 6 and all following years. $1.92 art 2. Finding the expected dividend yield. vidend yield- ividend yield = ividend yield 1 $2.30 105.5048 15 years rather than yea P₁ $70.020 3 $2,76 $3.32 Terminal value $3,98 4.2202 4.0% $4.22

How would this affect its price, dividend, yield, and capital gains yield? Find the price today. D₂ Year Dividend "V of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $59.5547 $70.0197 $1.60 10.0% 20% $1.60 D $1.920 2.74% Short-rung; for Years 1-5 only. Long-run g; for Year 6 and all following years. $1.92 art 2. Finding the expected dividend yield. vidend yield- ividend yield = ividend yield 1 $2.30 105.5048 15 years rather than yea P₁ $70.020 3 $2,76 $3.32 Terminal value $3,98 4.2202 4.0% $4.22

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 18MC

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