Tesla Inc (TSLA) has been growing at a rate of 33% per year in recentyears. This same supernormal growth rate is expected to last for another4 years, during which it will not pay dividend. It will start paying adividend of $5 a share in 5th year. After this, earnings and dividends areexpected to grow at a 4 percent annual rate indefinitely. Investorscurrently require a rate of return of 9 percent. What should be the currentmarket price per share of its stock?O 67.29O 70.8477.92O 63.75O 60.2112

A financial valuation technique called the Dividend Discount Model (DDM) is used to calculate the…

Answered: Tesla Inc (TSLA) has been growing at a…

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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ACME Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect ACME to begin paying dividends, beginning with a dividend of $2.50 coming 3 years from today. The dividend will grow rapidly - at a rate of 25% per year - during Years 4 and 5, but after Year 5, growth be a constant 5% per year. If the required return on ACME is 12%, what is the capital gains yield for the first year? 5% 12% 5.5% 0% 7%
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 23% per year - during Years 4 and 5, but after Year 5, growth should be a constant 8% per year. If the required return on Computech is 12%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. LA
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
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 $0.50 coming 3 years from today. The dividend should grow rapidly-at a rate of 31% per year-during Years 4 and 5, but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 16%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.
Chill Pill Pharmaceuticals is expecting a growth rate of 20% for the next two years due to its new drug. Thereafter it should level to a 5% growth rate. The last dividend paid was $0.65 per share. What price should the stock sell for if investors require 10% return?
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 $0.50 coming 3 years from today. The dividend should grow rapidly-at a rate of 25% per year-during Years 4 and 5, but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 15%, what is the value of the stock today? Do not round Intermediate calculations. Round your answer to the nearest cent. $
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 $1.75 coming 3 years from today. The dividend should grow rapidly-at a rate of 45% per year-during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 16%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations. $
Yam-Hash Corporation is expanding rapidly, and it does not pay any dividends because it currently needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of registration# coming 3 years from today. The dividend should grow rapidly at a rate of 50% per year during Years 4 and 5. After Year 5, the company should grow at a constant rate of 8% per year. If the required return on the stock is 15%, what is the value of the stock today?
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 $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 47% 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 17%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.
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.
The earnings of Eastern Corp. are expected to grow at an annual rate of 12% over the next 5 years and then slow to a constant rate of 8% per year. The company currently pays a dividend of $0.36 per share. What is the value of the company’s stock to an investor who requires a 14% rate of return? If the stock has a market price of $15, do you buy it ?
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 $1.75 coming 3 years from today. The dividend should grow rapidly—at a rate of 44% per year—during Years 4 and 5, but after Year 5, growth should be a constant 4% per year. If the required return on Computech is 17%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. $ _____

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