Nonconstant Growth. Tattletale News Corp. has been growing at a rate of 20% per year, and youexpect this growth rate in earnings and dividends to continue for another three years. (LO7-2)a. If the last dividend paid was $2, what will the next dividend be?b. If the discount rate is 15% and the steady growth rate after three years is 4%, what should thestock price be today?

Dividend speak to a parcel of a company's benefits disseminated to its shareholders as a remunerate…

Answered: Nonconstant Growth. Tattletale News…

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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9) see picture cant get the correct answer
● Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and ● the required return is 20%, what is the price of the stock? Remember that we have to find the PV of all expected future dividends. 7-22
Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 12.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price? Select the correct answer. a. $35.40 b. $38.34 c. $37.36 d. $36.38 e. $34.42
2. Intel just paid an annual dividend of $2 a share. Management estimates the dividend will increase by 10 percent a year for the next two years. After that, the dividend growth rate is estimated at 5 percent. The required rate of return is 12 percent. What is the value of this stock today?
9. Non-constant growth problem: the expected dividends in years 1, 2 and 3 are 3, 4 and 5.50. After that, it settles down to a constant growth rate of 5.5%. If you require a 9% return, what would you pay for the stock today?
1.A stock is expected to pay a dividend of $2.75 at the end of the year (i.e., D1 = $2.75), and it should continue to grow at a constant rate of 10% a year. If its required return is 14%, what is the stock's expected price 4 years from today? Do not round intermediate calculations. Round your answer to the nearest cent. = $ 2. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.00 coming 3 years from today. The dividend should grow rapidly—at a rate of 29% per year—during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 18%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. = $
Taussig Technologies Corporation (TTC) has been growing at a rate of 13% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to gn = 7%. a. If D₁ = $2.90 and rs = 13%, what is TTC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is its expected dividend yield at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. % What is its capital gains yields at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. % b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect the price, dividend yield, and capital gains yield? I. Due to the longer period of supernormal growth, the value of the stock will be higher for each year. Although the total return will remain the same, the distribution between dividend…

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