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Ten years ago, Video Toys began manufacturing and selling coin-operated arcade games. Dividends are currently $1.50 per share, having grown at a 13 percent compound annual rate over the past 5 years. That growth rate is expected to be maintained for the next 3 years, after which dividends are expected to grow at half that rate for 3 years. Beyond that time, Video Toys’s dividends are expected to grow at 4 percent per year. What is the current value of a share of Video Toys common stock if your required rate of return is 19 percent? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent. $  ______?

Ten years ago, Video Toys began manufacturing and selling coin-operated arcade games. Dividends are currently $1.50 per share, having grown at a 13 percent compound annual rate over the past 5 years. That growth rate is expected to be maintained for the next 3 years, after which dividends are expected to grow at half that rate for 3 years. Beyond that time, Video Toys’s dividends are expected to grow at 4 percent per year. What is the current value of a share of Video Toys common stock if your required rate of return is 19 percent? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent. $  ______?

Essentials Of Investments
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
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Ten years ago, Video Toys began manufacturing and selling coin-operated arcade games. Dividends are currently $1.50 per share, having grown at a 13 percent compound annual rate over the past 5 years. That growth rate is expected to be maintained for the next 3 years, after which dividends are expected to grow at half that rate for 3 years. Beyond that time, Video Toys’s dividends are expected to grow at 4 percent per year. What is the current value of a share of Video Toys common stock if your required rate of return is 19 percent? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.

$  ______?

 

TABLE II Present Value Interest Factor (PVIF) (S1 at i % per period for n periods): PVIF = (1+ PV = FV,(PVIF,a) Period, n 1% 1.000 3% 1.000 1.000 0.980 0.971 2% 4% 1.000 0.962 5% 1.000 6% 7% 8% 9% 10% 1.000 11% 1.000 12% 13% 1.000 0.943 1.000 0.935 1.000 0.926 0.857 0.794 1.000 0.917 1.000 0.893 0.797 0.712 0.636 1.000 0.885 0.990 0.980 0.971 0.952 0.909 0.901 0.961 0.943 0.942 0.915 0.907 0.864 0.812 0.731 0.659 0.593 0.783 0.693 0.613 0.543 0925 0.890 0.873 0.816 0.842 0.826 0.751 3 0.889 0.855 0.772 0.708 0.650 0.596 0.47 0.502 0.840 0.924 0.889 0.906 0.863 0.823 0.784 0.746 4 0.792 0.961 0.951 0.763 0.735 0.681 0.683 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.747 0.713 0.666 0.623 0.621 0.564 0.513 0567 0.507 0.452 0.888 0.838 0.871 0.813 0.853 0.789 0.837 0.766 0.705 0.665 0.627 0.592 0.58 0.527 0.497 0.469 0.442 0.417 0.535 0.482 0.434 0.480 0.425 0.942 0.630 0.933 0.923 0.914 O.583 0.540 0.711 0.677 0.582 0.544 0.467 0.404 0.376 033 0.295 0.261 0.645 10 11 0.508 0.475 0.500 0.463 0.460 0.422 0.424 0.386 0.350 0.391 0.352 0.317 0.361 0.322 0.905 0.820 0.744 0.804 0.722 0.614 0.896 0.887 0.585 0.557 0.429 0.397 0.388 0.287 0.257 0.229 0.205 0.183 0.788 0.701 0.773 0.681 0.286 0.258 0.232 0.209 0.231 0.204 0.181 12 13 0.625 0.601 0.444 0.356 0.319 0.879 0.530 0.758 0.661 0.743 0.642 0577 0.555 0534 0.415 0.388 0.362 0.368 0.340 0.326 0.299 0.290 0.263 0.239 0.505 0.481 14 0.870 15 0.315 0.292 0275 0.252 0.160 0.141 0.861 0.218 0.198 0.180 0.164 0.188 0.170 0.153 0.138 0.124 0.853 16 17 0.728 0.623 0.714 0.605 0.700 0.587 0.458 0.436 0.416 0.394 0.371 0.339 0.163 0.844 0513 0.494 0.317 0.270 0.250 0.231 0.212 0.296 0.276 0.258 0.197 0.146 0.130 0.116 0.104 0.066 0.125 0.111 0.098 0.087 18 19 0.836 0.350 0.331 0.828 0.820 0.686 0.570 0.673 0554 0.622 0.492 0.396 0.377 0310 0232 0.215 0.194 0.178 0.126 0.475 20 24 0.456 0.312 0.149 0.788 0.780 0.390 0.375 0.308 0.295 0.231 0.142 0.247 0.233 0.174 0.158 0.146 0.102 0.092 0.057 0.082 0.074 0.044 0.053 0.047 25 30 0.610 0.478 0.552 0.412 0.184 0.116 0.059 0.742 0.672 0.131 0.067 0.034 0.099 0.046 0.075 0.032 0.026 0.008 0.033 0.453 0.307 0.372 0.228 0.305 0.170 0.208 0.141 0.097 0.054 0.030 40 0.022 0.015 0.011 50 0.608 0.550 0.087 0.021 0.010 0013 0.006 0.009 0.003 0.005 0.002 0.003 0.001 0.002 0.001 60 0.095 0.054 0.017 Period n 17% 24% 14% 15% 16% 1.000 0.862 18% 19% 20% 1.000 0.833 28% 1.000 0.781 32% 36% 40% 1.000 0.877 1.000 0.870 1.000 1.000 0.847 1.000 0.840 1.000 1.000 1.000 0.735 1.000 0.714 0.806 0.758 0.769 0.675 0.855 0.731 0.624 0.756 0.658 0.572 0.497 0.743 0.641 0.718 0.706 0.694 0.579 0.650 0.524 0.610 0.477 0574 0.41 0.398 0.510 0.364 0.435 0.592 0.519 0.609 0.516 0.437 0.593 0.499 0.419 0552 0.534 0.482 0.402 0.423 0.341 0.373 0.291 0.329 0.250 0292 0215 0.260 0.186 0.476 0.456 0.400 0.432 0.376 0410 0.354 0.456 0.390 0.333 0.158 0.116 0.370 0.314 0.266 0.225 0.191 0352 0.296 0.335 0.279 0.275 0.222 0227 0.178 0.189 0.143 0.133 0.095 0.068 0.048 0.351 0.308 0.327 0.284 0.305 0.263 0.285 0.243 0.208 0.178 0.152 0.130 0.249 0.209 0.233 0.194 0.179 0.144 0.139 0.108 0.085 0.063 0.108 0.085 0.066 0.082 0.062 0.047 0227 0.195 0.168 0.176 0.148 0.124 0.104 0.046 0.034 0.025 0.018 0.270 0.237 0.247 0.162 0.135 0.116 0.094 0.035 0.025 11 0.215 0.187 0.162 0.137 0.116 0.099 12 13 0.208 0.112 0.093 0.076 0.061 0.052 0.040 0.036 0.018 0.013 14 15 0.182 0.160 0.140 0.163 0.141 0.123 0.145 0.125 0.108 0.027 0.021 0.016 0.111 0.088 0.074 0.078 0.065 0.049 0.040 0.032 0.025 0.014 0.010 0.009 0.006 0.095 0.084 0.071 16 17 0.123 0.108 0.107 0.093 0.093 0.080 0.081 0.069 0.062 0.052 0.054 0.045 0.032 0.019 0.015 0.012 0.009 0.007 0.005 0.003 0.005 0.060 0.051 0.026 0.021 0.017 0.044 0.037 0.031 0.015 18 19 0.095 0.081 0.069 0.060 0.059 0.051 0.038 0.031 0.012 0.009 0.007 0.004 0.002 20 24 0.083 0.073 0.043 0.070 0.061 0.035 0.051 0.028 0.043 0.023 0.043 0.037 0.019 0.026 0.013 0.014 0.006 0.007 0.003 0.005 0.004 0.001 0.003 0.002 0.001 0.002 0.001 0.000 0.000 25 30 0.038 0.020 0.030 0.015 0.024 0.012 0.020 0.009 0.016 0.007 0.001 0.013 0.005 0.010 0.004 0.005 0.002 0.002 0.001 0.001 0.000 0.000 40 50 0.005 0.001 0.004 0.001 0.003 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.002 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 60 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 23 4507 0060123
Transcribed Image Text:TABLE II Present Value Interest Factor (PVIF) (S1 at i % per period for n periods): PVIF = (1+ PV = FV,(PVIF,a) Period, n 1% 1.000 3% 1.000 1.000 0.980 0.971 2% 4% 1.000 0.962 5% 1.000 6% 7% 8% 9% 10% 1.000 11% 1.000 12% 13% 1.000 0.943 1.000 0.935 1.000 0.926 0.857 0.794 1.000 0.917 1.000 0.893 0.797 0.712 0.636 1.000 0.885 0.990 0.980 0.971 0.952 0.909 0.901 0.961 0.943 0.942 0.915 0.907 0.864 0.812 0.731 0.659 0.593 0.783 0.693 0.613 0.543 0925 0.890 0.873 0.816 0.842 0.826 0.751 3 0.889 0.855 0.772 0.708 0.650 0.596 0.47 0.502 0.840 0.924 0.889 0.906 0.863 0.823 0.784 0.746 4 0.792 0.961 0.951 0.763 0.735 0.681 0.683 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.747 0.713 0.666 0.623 0.621 0.564 0.513 0567 0.507 0.452 0.888 0.838 0.871 0.813 0.853 0.789 0.837 0.766 0.705 0.665 0.627 0.592 0.58 0.527 0.497 0.469 0.442 0.417 0.535 0.482 0.434 0.480 0.425 0.942 0.630 0.933 0.923 0.914 O.583 0.540 0.711 0.677 0.582 0.544 0.467 0.404 0.376 033 0.295 0.261 0.645 10 11 0.508 0.475 0.500 0.463 0.460 0.422 0.424 0.386 0.350 0.391 0.352 0.317 0.361 0.322 0.905 0.820 0.744 0.804 0.722 0.614 0.896 0.887 0.585 0.557 0.429 0.397 0.388 0.287 0.257 0.229 0.205 0.183 0.788 0.701 0.773 0.681 0.286 0.258 0.232 0.209 0.231 0.204 0.181 12 13 0.625 0.601 0.444 0.356 0.319 0.879 0.530 0.758 0.661 0.743 0.642 0577 0.555 0534 0.415 0.388 0.362 0.368 0.340 0.326 0.299 0.290 0.263 0.239 0.505 0.481 14 0.870 15 0.315 0.292 0275 0.252 0.160 0.141 0.861 0.218 0.198 0.180 0.164 0.188 0.170 0.153 0.138 0.124 0.853 16 17 0.728 0.623 0.714 0.605 0.700 0.587 0.458 0.436 0.416 0.394 0.371 0.339 0.163 0.844 0513 0.494 0.317 0.270 0.250 0.231 0.212 0.296 0.276 0.258 0.197 0.146 0.130 0.116 0.104 0.066 0.125 0.111 0.098 0.087 18 19 0.836 0.350 0.331 0.828 0.820 0.686 0.570 0.673 0554 0.622 0.492 0.396 0.377 0310 0232 0.215 0.194 0.178 0.126 0.475 20 24 0.456 0.312 0.149 0.788 0.780 0.390 0.375 0.308 0.295 0.231 0.142 0.247 0.233 0.174 0.158 0.146 0.102 0.092 0.057 0.082 0.074 0.044 0.053 0.047 25 30 0.610 0.478 0.552 0.412 0.184 0.116 0.059 0.742 0.672 0.131 0.067 0.034 0.099 0.046 0.075 0.032 0.026 0.008 0.033 0.453 0.307 0.372 0.228 0.305 0.170 0.208 0.141 0.097 0.054 0.030 40 0.022 0.015 0.011 50 0.608 0.550 0.087 0.021 0.010 0013 0.006 0.009 0.003 0.005 0.002 0.003 0.001 0.002 0.001 60 0.095 0.054 0.017 Period n 17% 24% 14% 15% 16% 1.000 0.862 18% 19% 20% 1.000 0.833 28% 1.000 0.781 32% 36% 40% 1.000 0.877 1.000 0.870 1.000 1.000 0.847 1.000 0.840 1.000 1.000 1.000 0.735 1.000 0.714 0.806 0.758 0.769 0.675 0.855 0.731 0.624 0.756 0.658 0.572 0.497 0.743 0.641 0.718 0.706 0.694 0.579 0.650 0.524 0.610 0.477 0574 0.41 0.398 0.510 0.364 0.435 0.592 0.519 0.609 0.516 0.437 0.593 0.499 0.419 0552 0.534 0.482 0.402 0.423 0.341 0.373 0.291 0.329 0.250 0292 0215 0.260 0.186 0.476 0.456 0.400 0.432 0.376 0410 0.354 0.456 0.390 0.333 0.158 0.116 0.370 0.314 0.266 0.225 0.191 0352 0.296 0.335 0.279 0.275 0.222 0227 0.178 0.189 0.143 0.133 0.095 0.068 0.048 0.351 0.308 0.327 0.284 0.305 0.263 0.285 0.243 0.208 0.178 0.152 0.130 0.249 0.209 0.233 0.194 0.179 0.144 0.139 0.108 0.085 0.063 0.108 0.085 0.066 0.082 0.062 0.047 0227 0.195 0.168 0.176 0.148 0.124 0.104 0.046 0.034 0.025 0.018 0.270 0.237 0.247 0.162 0.135 0.116 0.094 0.035 0.025 11 0.215 0.187 0.162 0.137 0.116 0.099 12 13 0.208 0.112 0.093 0.076 0.061 0.052 0.040 0.036 0.018 0.013 14 15 0.182 0.160 0.140 0.163 0.141 0.123 0.145 0.125 0.108 0.027 0.021 0.016 0.111 0.088 0.074 0.078 0.065 0.049 0.040 0.032 0.025 0.014 0.010 0.009 0.006 0.095 0.084 0.071 16 17 0.123 0.108 0.107 0.093 0.093 0.080 0.081 0.069 0.062 0.052 0.054 0.045 0.032 0.019 0.015 0.012 0.009 0.007 0.005 0.003 0.005 0.060 0.051 0.026 0.021 0.017 0.044 0.037 0.031 0.015 18 19 0.095 0.081 0.069 0.060 0.059 0.051 0.038 0.031 0.012 0.009 0.007 0.004 0.002 20 24 0.083 0.073 0.043 0.070 0.061 0.035 0.051 0.028 0.043 0.023 0.043 0.037 0.019 0.026 0.013 0.014 0.006 0.007 0.003 0.005 0.004 0.001 0.003 0.002 0.001 0.002 0.001 0.000 0.000 25 30 0.038 0.020 0.030 0.015 0.024 0.012 0.020 0.009 0.016 0.007 0.001 0.013 0.005 0.010 0.004 0.005 0.002 0.002 0.001 0.001 0.000 0.000 40 50 0.005 0.001 0.004 0.001 0.003 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.002 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 60 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 23 4507 0060123
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