Tedeschi Trucking Co. is expected to grow rapidly over the next few years. According to our model, it will not pay any dividends in the first 2 years. The company will pay a dividend of $12 3 years from today and will increase the dividend 4.5% thereafter. If the required rate of return is 20%, what is the current share price?

Tedeschi Trucking Co. is expected to grow rapidly over the next few years. According to our model, it will not pay any dividends in the first 2 years. The company will pay a dividend of $12 3 years from today and will increase the dividend 4.5% thereafter. If the required rate of return is 20%, what is the 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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Laurel Enterprises pays annual dividends, and the next dividend is expected to be in one year. Laurel expects earnings next year of $3.58 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment; this is expected to continue forever. What do you estimate the firm's current stock price to be? (Hint: its next dividend is due in one year.) C The current stock price will be $ (Round to the nearest cent.)
A young company currently does not pay a dividend. The company retains all its earnings to finance its growth. However, 10 years from now the company is expected to start paying a $1.50 dividend. According to analysts, the dividend should then grow by 5% annually forever. If the required return on the share investment is 15%, what should be the company's share price five years from today? a. $16.28 b. $8.57 c. $11.50 d. $6.24
Suppose you are considering buying the stocks of two companies that are similar in many respects. Both companies are expected to earn $6 per share in the coming year. Company A is expected to pay out the entire amount of earning as dividends one year from now, while company B is expected to pay out only half of the earnings as dividend, i.e. $3 per share. Both require a rate of return of 14%. A's constant growth of rate is 0, while B's is 5%. What are the expected prices of Stocks A and B? Stock A $42.86; Stock B $33.33 Stock A $50.12; Stock B $60.25 Stock A $35.86; Stock B $45.80
Synovec Company is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 10 percent, and the company just paid a dividend of $2.65, 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
Synovec Company is growing quickly. Dividends are expected to grow at a rate of 15 percent for the next 3 years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 7 percent and the company just paid a $3.20 dividend. what is the current share price?
What would the effect of the failure in the ratio measurement?
Taussig Technologies Corporation (TTC) has been growing at a rate of 15% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to gn = 7%. If D0 = $1.50 and rs = 12%, 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.
Synovec Company is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent and the company just paid a $1.90 dividend. what is the current share price?
After graduation, you plan to work for Asia Corporation for 12 years and then start your own business. You expect to save and deposit Php7,500 a year for the first 6 years (n = 1 through n = 6) and Php15,000 annually for the following 6 years (n = 7 through n = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a Php25,000 graduation gift which you will deposit immediately (n = 0). If the account earns 8% compounded annually, how much will you have when you start your business 12 years from now? A.Php228,145 B. Php250,712 C. Php260,302 D. Php263,907 E. Php277,797
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 10 percent, and the company just paid a dividend of $2.65, what is the current share price?
Taussig Technologies Corporation (TTC) has been growing at a rate of 15% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to gn = 6%. If D0 = $1.20 and rs = 13%, what is TTC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent.$ 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. What will TTC's dividend and capital gains yields be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth; the calculations are very easy.) Round your answers to two decimal places.Dividend yield: %Capital gains yield
Barton Industries expects next year's annual dividend, D1, to be $2.30 and it expects dividends to grow at a constant rate g = 4.9%. The firm's current common stock price, P0, is $25.00. If it needs to issue new common stock, the firm will encounter a 4.5% flotation cost, F. What is the flotation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. _____% What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places. _____%

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