Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.75 per share 11 years from today and will increase the dividend by 5.25 percent per year thereafter. The required return on the stock is 13.25 percent. What is the price of the stock 10 years from today? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price in 10 years What is the current share price? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.75 per share 11 years from today and will increase the dividend by 5.25 percent per year thereafter. The required return on the stock is 13.25 percent. What is the price of the stock 10 years from today? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price in 10 years What is the current share price? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price
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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What is the price of the stock 10 years from today? AND
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What is the current share price? |
Transcribed Image Text:Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the
stock over the next 10 years because the firm needs to plow back its earnings to fuel
growth. The company will then pay a dividend of $14.75 per share 11 years from
today and will increase the dividend by 5.25 percent per year thereafter. The required
return on the stock is 13.25 percent.
What is the price of the stock 10 years from today? (Do not round Intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)
Price in 10 years
What is the current share price? (Do not round Intermediate calculations and round
your answer to 2 decimal places, e.g., 32.16.)
Current share price
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