Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be veryprofitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though,Portman's dividend is expected to grow at a constant rate of 4.00% per year.TermDividends one year from now (D1)Horizon value (P₁)Intrinsic value of Portman's stockValue10.77%11.20%12.41%8.96%The risk-free rate (TRF) is 5.00%, the market riskpremium (RPM) is 6.00%, and Portman's beta is 1.70.Assuming that the market is in equilibrium, use theinformation just given to complete the table.What is the expected dividend yield for Portman's stock today?Now let's apply the results of your calculations to the following situation: Portman has 600,000 shares outstanding, and Judy Davis, an investor, holds 9,000 shares at the current price(computed above). Suppose Portman is considering issuing 75,000 new shares at a price of $17.48 per share. If thenew shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on aper-share basis?O $0.71 per shareO $0.42 per share$0.29 per shareO $0.34 per shareThus, Judy's investment will be diluted, and Judy will experience a totalof

Here, Current Dividend $ 1.92Growth Rate for 1 year20%Constant growth Rate after 1…

Answered: Portman Industries just paid a dividend…

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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4. The dividends that Firm A pays to its stockholders are expected to grow at 18% a year for the next nine years. From t=9 onwards, the growth rate in dividends will drop to 13.5% per year, and the firm expects to be able to sustain it at this level. Assuming that the market capitalization rate is 18% a year, work out the value of the firm assuming that the dividend expected to be paid at t=1 is $4.50.
News Corp is expected to pay a dividend of $0.8 in one year. The dividend is expected to grow at 12% in the following 3 years and then at a constant rate of 4% per annum indefinitely. If the required rate of return is 12%, what is the price of the company's share today? Please illustrate your answer using a timeline.
Terrell Enterprises recently paid a dividend, D0 of $1.50. It expects to have nonconstant growth of 25% for 2 years followed by a constant rate of 6% thereafter. The firms required return is 12%. What is the firms intrinsic value today?
Zapata Corporation will pay dividends of USD 5.00, USD 6.00, and USD 7.00 in the next three years. Thereafter, the company expects its dividend growth rate to be a constant 10 percent. If the required rate of return is 15 percent, what is the current market price of Zapata stock?
Holt Enterprises recently paid a dividend. Do. of $3.25. It expects to have nonconstant growth of 17% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 18%. a. How far away is the horizon date? 1. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. II. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. III. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. IV. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. V. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. -Select- b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is the firm's…
In the case of Sheldon, Inc., they will pay constant dividends at the end of the next two years. After that, the dividend is expected to increase by a steady 5 percent annually indefinitely. With the current share price standing at $50, what will be the dividend payment in the next year if the required rate of return is 12 percent?
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The next dividend payment by Modern Building Ltd will be $1.50 per share. The dividends are anticipated to maintain a growth rate of 5.5% forever. If one Modern Building share currently sells for $35.15, what is the required return?
Question: Hart Enterprises recently paid a dividend of $1.25. It expects to have non constant growth of 20% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 10%. a. How far away is the terminal, or horizon, date? b. What is the firm's horizon, or terminal, value? c. What is the firm's intrinsic value today?
Holt Enterprises recently paid a dividend, Do, of $2.75. It expects to have nonconstant growth of 19% for 2 years followed by a constant rate of 3% thereafter. The firm's required return is 15%. a. How far away is the horizon date? I. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. II. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. III. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. IV. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. V. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. II b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is the firm's…
The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…

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