Tesla Inc (TSLA) has been growing at a rate of 33% per year in recent years. This same supernormal growth rate is expected to last for another 4 years, during which it will not pay dividend. It will start paying a dividend of $5 a share in 5th year. After this, earnings and dividends are expected to grow at a 4 percent annual rate indefinitely. Investors currently require a rate of return of 9 percent. What should be the current market price per share of its stock? O 67.29 O 70.84 77.92 O 63.75 O 60.21
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A: The objective of the question is to determine the selling price of Trend-Line Incorporated's shares…
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A: Given:
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A: Dividend year 3(D3)=1 Growth rate Year 4&5 = 25% Growth rate after Year 5=7% Required return =…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Today's share price can be figured out by using a method called the Dividend Discount Model (DDM).…
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A: EPS refers to Earnings Per Share which shows the amount of net income attributed to each single…
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A: The value of a share of common stock is equal to the present value of all future cash flows…
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A: Annual Dividend = $0.2 Growth for 4 years = double Growth after 5 years = 2% Required rate of…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Formulas:
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A: The present value of future earnings is the current valuation of anticipated income or cash flows,…
Q: If the required return on Microtech is 15% what is the value of the stock today?
A: The value of stock today is the PV of future dividends. To determine the dividend paid, we need to…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
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A: Present value is that amount which is calculated with the help of future benefits from the…
Q: a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next…
A: Present value is that amount which is calculated with the help of future benefits from the…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Absolute valuation method: An absolute value is a valuation method for evaluate the company's…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: The dividend after 3 years is $1.75. Future dividends can be calculated with the help of the below…
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A: The dividend growth model is used to determine the stock price when the dividend grows at a stable…
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A: The dividend discount model is the model that helps to compute the price of the stock with the help…
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A: i) Computation of Current Stock Price Growth rate = 2% Expected Dividend = 1 Required rate = 12%…
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A:
Q: current price
A: Current price refers to the indication of the price at the present moment in time which is said to…
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A: Given, Dividend $3 Growth rate is 8% Required return is 14%
Q: You are running a hot Internet company. Analysts predict that its earnings will grow at 10 % per…
A: The present value of future earnings is the current valuation of anticipated income or cash flows,…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
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Q: Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings, hence…
A: Formulas:
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Stock Value: It represents the current worth of the share to the buyer and seller which is…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: The stock value today (current stock value) can be calculated by adding the present value of future…
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Price = [ Dividend3 / ( 1 + Required rate )3 ] + [ Dividend4 / ( 1 + Required rate )4 ] + […
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: Value of stock refers to the price of the stock that are being traded by the company in relation to…
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- Emerald City Corporation (ECC) is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect ECC to begin paying a dividend of $2.00 three years from today. The dividend should grow rapidly: at a rate of 30% per year during years 4 and 5. After Year 5, growth should be a constant 5% per year forever. If the required return on ECC is 9%, what is the value of the stock today?Macro Systems just paid an annual dividend of $0.32 per share. Its dividend is expected to double for the next four years (D1 through D4), after which it will grow at a more modest pace of 1% per year. If the required return is 13%, what is the current price?Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. a) What would be the likely stock price in year 5? b) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
- Trend-Line Incorporated has been growing at a rate of 7% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $6 per share. If the market expects a 12% rate of return on Trend-Line, at what price must it be selling? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to assets in place? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to growth opportunities?Analysts forecast that Dixie Chicks, Inc. (DCI) will pay a dividend of $3.00 a share now, continuing a long-term growth trend of 8% per year. If this trend is expected to continue indefinitely, and investors' required rate of return for DCI is 14%: a) What is the market value per share of DCI's common stock? b) What is the market value per share of DCI's common stock if required rate of return is 11%? c) If there is expected to be non-constant growth of 30% for the first year, then 24% for the next year, then 14% for next year, finally stabilizing to a constant growth of 9% per year in the 4th year what is the market value per share with the original required rate of return?Mexican Motor's market cap is 200 billion pesos. Next year's cash flow is 8.6 billion pesos. Security analyst are forecasting that free cash flow will grow by 7.60% per year for the next five years. a. Assume that the 7.60 growth rate is expected to continue forever. What rate of return are investors expecting? b1. Mexican Motors has generally earned about 10% on book equity (ROE= 10%) and reinvested 50% of earnings. The remaining 50% of earnings has gone to free cash flow. Suppose the company mantians the same ROE and investment rate for the long run. What will be the growth rate of earnings? b2. What would be he rate of return?
- Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. i) Compute the current stock price for Whizcom Inc.ii) What would be the likely stock price in year 5?iii) What would be per annum rate of return implied by a change in prices from time 0 to time 5?Spencer Supplies’ stock is currently selling for $60 a share. The firm is expected toearn $5.40 per share this year and to pay a year-end dividend of $3.60.a. If investors require a 9% return, what rate of growth must be expected forSpencer? If Spencer reinvests earnings in projects with average returns equal to thestock’s expected rate of return, what will be next year’s EPS? [Hint: g ROE(Retention ratio).Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $8 per share. a. If the market expects a 10% rate of return on Trend-Line, at what price must it be selling? (Do not round intermediate calculations.) Current selling price
- Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence it does not pay dividends. However, investors expect Microtech 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 50% per year -during Years 4 and 5; but after Year 5, growth should be a constant 8% per year. If the required return on Microtech is 15% what is the value of the stock today?The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year.a. If this year’s year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM?b. If the expected earnings per share are $12, what is the implied value of the ROE on future investment opportunities?c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)?The FI Corporation's dividends per share are expected to grow indefinitely by 5% per year. a. If this year's year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $12, what is the implied value of the ROE on future investment opportunities? c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)?