Assume that it is now January 1, 2022. Wayne-Martin Electric Inc. (WME) has developed a solarpanel capable of generating 200% more electricity than any other solar panel currently on themarket. As a result, WME is expected to experience a 15% annual growth rate for the next 5years. Other firms will have developed comparable technology by the end of 5 years, and WME'sgrowth rate will slow to 4% per year indefinitely. Stockholders require a return of 12% onWME's stock. The most recent annual dividend (Do), which was paid yesterday, was $1.50 pershare.a. Calculate WME's expected dividends for 2022, 2023, 2024, 2025, and 2026. Do not roundintermediate calculations. Round your answers to the nearest cent.D2022 = $D2023 = $D2024 = $D2025 = $D2026 = $b. Calculate the value of the stock today, Po. Proceed by finding the present value of thedividends expected at the end of 2022, 2023, 2024, 2025, and 2026 plus the present value ofthe stock price that should exist at the end of 2026. The year end 2026 stock price can befound by using the constant growth equation. Notice that to find the December 31, 2026,price, you must use the dividend expected in 2027, which is 4% greater than the 2026dividend. Do not round intermediate calculations. Round your answer to the nearest cent.c. Calculate the expected dividend yield (D1/Po), capital gains yield, and total return (dividendyield plus capital gains yield) expected for 2022. (Assume that Po = Po and recognize thatthe capital gains yield is equal to the total return minus the dividend yield.) Do not roundintermediate calculations. Round your answers to two decimal places.D1/Po =%Capital gains yield =%Expected total return =Then calculate these same three yields for 2027. Do not round intermediate calculations.Round your answers to two decimal places.D6/P5 =Capital gains yield =%Expected total return =

Answered: Assume that it is now January 1, 2022.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are valuing your business ready for its initial public offering. You have determined the most recent annual (2021) cash-flow to the firm, was $30 million. You expect that these cash-flows will increase at an 10% annual rate (g1) over the next two years. At the end of two years (the end of 2023), the cash-flow growth rate will drop to 5% per year (g2) in perpetuity. The firm’s WACC is 15%. Calculate the expected value of your firm.
Management of Blossom, a biotech firm, forecasted the following growth rates for the next three years: 35 percent, 28 percent, and 22 percent. Management then expects the company to grow at a constant rate of 9 percent forever. Te company paid a dividend of $1.25 last week. If the required return is 15 percent, what is the value of this stock. (Round to 2 decimal places)
Blossom Manufacturing Company has been growing at a rate of 6 percent for the past two years, and the CEO expects the company to continue to grow at this rate for the next several years. The company paid a dividend of $1.50 this year. If your required rate of return is 12 percent, what is the maximum price that you would be willing to pay for this company’s stock? (Round intermediate calculation and final answer to 2 decimal places, e.g. 15.25.) Maximum price $enter the maximum price of the stock rounded to 2 decimal places
As a financial analyst working for CSFB your job is to evaluate the equity value of the WIFI Inc. Your research identified the following information about that firm: it would pay an annual dividend of $1.20 per share next year (in 2022) and the required rate of return on capital is 20%. (a) Suppose that dividends are expected to stay constant forever. What is the maximum amount you would pay today (in 2021) for WIFI Inc? For parts b, c and d assume that dividends grow at a constant 3% rate a year forever. (b) What is the maximum amount you would pay today (in 2021) for WIFI Inc’s share of stock? (c) What is the capital gains yield for WIFI Inc.? (d) What is the dividend yield for WIFI Inc.? For part (e) assume that the dividends will be as follows $1.20 in 2022, $1.40 in 2023 and $1.60 in 2024. After that, dividends are projected to increase at a constant rate of 2% per year forever. (e) How much are you willing to pay today (in 2021) to buy one share of this stock?
Scriabin Inc. is expected to pay the following dividends over the next two years: $3 and $2. After that, the company pledges to maintain a constant 5% growth rate in dividends, forever. What is the price of this stock today if the required return on the stock is 14% ?
A company that has a patent right for a new mobile technology that is expected to enable it to generate growth of 25% for next three years. From the beginning of year 4, the company expects to grow at a constant rate of 6%. The company just paid a dividend of $2.20 on 31 Dec of Year 0.Compute the estimate of the current price of Talkie shares. Assume the required return on equity is 10%.
You are considering investing in the company Husky Inc. The company just paid $2 dividends over the course of last year. The company is going through a global expansion currently. You estimate that the company will pay annual dividends of $3, $4.5, $6.75, $10.125, and $15.1875 for the next 5 years. After that, the company will continue to pay annual dividends growing at 3% per year forever. You believe the appropriate discount rate for Husky Inc. should be 10% . What is the fundamental price for Husky Inc.? Enter a number with 2 decimals, i.e., if the answer is $20, enter 20.00.
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Today is January 1, 2019. The Vegas Gambling Company has just developed a new game of chance that is very popular with customers, and very profitable for the casino. Because of this development, The Vegas Gambling Company is expected to experience a 20 percent annual dividend growth rate for the next 2 years. By the end of 2 years, other firms will have developed comparable technologies. After which, The Vegas Gambling Company's dividend growth rate will slow to 10 percent per year indefinitely. Investors require a return of 25 percent on The Vegas Gambling Company Stock. The Vegas Gambling Company paid a dividend yesterday of $1.00 per share. What is the current value of a share of The Vegas Gambling Company stock? Show your work to earn partial credit.
Percentages need to be entered in decimal format, for instance 3% would be entered as .03. Only need the last two questions answered. I added the first one because it says to refer to that question 2. Ultimate Electric, Inc. has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, Ultimate is expected to experience a 15% annual (nonconstant) growth rate for the next five years (supernormal period). When the five-year period ends, other firms will have developed comparable technology, and Ultimate's growth rate will slow to 5% per year (constant) indefinitely. Stockholders require a return of 12% on Ultimate's stock. The firms's most recent annual dividend (D0), which was paid yesterday, was $1.75 per share. What is the current price (P0) of the stock today? What is the market value (price) at the end of Year 5? 3. Consider the scenario in Question 2 and suppose your boss believes that Ultimate's annual…

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