iscal year were $$6.286.28. The company will retain all its earnings this year (from t=00 to t=11 ), reinvesting in new projects with a return on new investment of 44.044.0%. The next year (from t=11 to t=22 ), the compa
ClapTrap is a rapidly growing image messaging company. The company's growth strategy requires rapid reinvestment currently, with dividend payouts increasing as growth opportunities gradually disappear.
You have the following financial information about ClapTrap:
- Earnings in the most recently concluded fiscal year were $$6.286.28. The company will retain all its earnings this year (from t=00 to t=11 ), reinvesting in new projects with a
return on new investment of 44.044.0%. - The next year (from t=11 to t=22 ), the company will retain 85.085.0% of its earnings. Return on new investment is expected to be 30.030.0%.
- In the following year (from t=22 to t=33 ), the company will retain 69.069.0% of its earnings with an expected return on new investment of 20.020.0%.
- The company will then enter a period of stable growth, retaining 49.049.0% of its earnings in perpetuity.
a) What are the expected dividends per share for each period from t=11 to t=33 ?
The expected dividends per share for t=11 is $$.
(Round your answer to four decimal places)
The expected dividends per share for t=22 is $$
(Round your answer to four decimal places)
The expected dividends per share for t=33 is $$
(Round your answer to four decimal places)
b) ClapTrap's common stock currently trades at $$60.860.8 per share, and you estimate the
The return on new investment will be .............% for ClapTrap when it reaches its stable growth perpetuity phase.
(Round your answer to two decimal places)
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