Homework Help is Here – Start Your Trial Now!
Business
Finance
The stock of Alpha Tool sells for $81.20 per share. Its current dividend rate, D0, is $3 per share. Analysts and investors expect Alpha to increase its dividends at a 20 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 17 percent for years 3 and 4 and then to settle down to 13 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number.  %

The stock of Alpha Tool sells for $81.20 per share. Its current dividend rate, D0, is $3 per share. Analysts and investors expect Alpha to increase its dividends at a 20 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 17 percent for years 3 and 4 and then to settle down to 13 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number.  %

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
Problem 1PS
See similar textbooks
icon
Related questions
icon
Concept explainers
Topic Video
Question
100%

The stock of Alpha Tool sells for $81.20 per share. Its current dividend rate, D0, is $3 per share. Analysts and investors expect Alpha to increase its dividends at a 20 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 17 percent for years 3 and 4 and then to settle down to 13 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number.

 %

Safari File Edit View History Bookmarks Window Help Mon Apr 11 7:01 PM + 88 00 cnow.apps.ng.cengage.com b MindTap - Cengage Learning table5a_2.jpg 710×953 pixels Таxes Work Force TABLE II Present Value Interest Factor (PVIF) ($1 at i % per period for n periods); PVIF = 1 ; PVo = FV,(PVIFi) (1+ i)"" Period, n 2% 3% 1.000 1.000 0.980 0.971 4% 5% 7% 1.000 8% 1.000 0.926 0.857 10% 11% 1.000 12% 1.000 1% 6% 9% 13% BUS300A 1.000 0.990 1.000 0.962 1.000 0.952 1.000 0.943 0.890 1.000 0.917 1.000 0.909 1.000 0.885 Photos 1 0.935 0.901 0.893 0.925 0.889 0.855 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.873 0.816 0.763 0.842 0.772 0.708 0.650 0.596 0.547 0.502 2 0.980 0.961 0.943 0.826 0.812 0.797 0.712 0.636 0.567 0.783 Screen Shot 0.840 0.792 0.794 0.735 0.731 0.659 0.693 0.613 3 0.971 0.942 0.915 0.961 0.751 0.683 0.924 0.889 2022-0...53.23 PM 0.713 0.666 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.951 0.906 0.863 0.942 0.822 0.790 0.747 0.705 0.665 0.627 0.592 0.558 0.621 0.564 0.593 0.535 0.543 0.480 0.888 0.838 0.507 0.623 0.582 0.425 0.376 7 0.933 0.923 0.871 0.813 0.853 0.789 0.760 0.731 0.513 0.482 0.452 0.404 0.361 0.467 0.434 BUS301A- BUS474A 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.837 0.766 9. 10 0.645 0.614 0.544 0.508 0.914 0.703 0.676 0.460 0.422 0.424 0.386 0.391 0.352 0.905 0.820 0.744 0.322 Integrati...lem.xlsx 0.585 0.557 0.350 0.319 11 0.896 0.887 0.804 0.722 0.650 0.527 0.497 0.469 0.442 0.475 0.388 0.356 0.326 0.299 0.317 0.286 0.287 12 0.788 0.701 0.625 0.444 0.257 0.415 0.388 0.362 0.339 0.317 0.296 0.276 0.258 0.197 0.184 0.290 0.263 0.258 13 14 0.879 0.870 0.861 0.853 0.844 0.836 0.773 0.681 0.758 0.661 0.601 0.577 0.530 0.505 0.229 0.205 0.232 15 16 0.743 0.642 0.728 0.623 0.714 0.605 0.700 0.587 0.555 0.534 0.513 0.494 0.275 0.252 0.239 0.218 0.198 0.209 0.188 0.183 0.163 0.481 0.417 0.394 0.371 0.350 0.331 0.312 0.247 0.233 0.174 0.097 0.054 0.030 0.458 17 18 0.436 0.416 0.396 0.377 0.310 0.295 0.231 0.270 0.250 0.170 0.153 0.146 0.130 0.212 0.180 0.111 0.232 0.215 0.158 0.146 19 20 0.686 0.570 0.673 0.554 0.475 0.456 0.828 0.820 0.788 0.622 0.492 0.780 0.610 0.478 0.194 0.178 0.126 0.116 0.164 0.149 0.102 0.092 0.138 0.116 0.104 0.098 0.087 0.124 0.082 0.074 2021.11.15 Letter 24 25 0.390 0.375 0.066 0.059 0.053 0.047 from CSEU 0.131 0.067 0.034 0.017 0.099 0.046 0.021 0.010 0.044 30 40 0.026 0.008 0.742 0.672 0.608 0.550 0.552 0.412 0.453 0.307 0.308 0.208 0.141 0.095 0.231 0.142 0.087 0.054 0.075 0.032 0.057 0.022 0.033 0.015 0.011 50 60 0.372 0.228 0.305 0.170 0.013 0.006 0.009 0.003 0.005 0.002 0.003 0.002 0.001 0.001 Period, n 14% 15% 16% 17% 18% 19% 20% 24% 28% 32% 36% 40% 1.000 0.877 1.000 1.000 0.862 1.000 1.000 0.847 1.000 0.840 1.000 0.833 0.694 0.579 1.000 0.806 1.000 0.781 0.610 0.477 0.373 0.291 1.000 1.000 1.000 0.714 1 0.870 0.855 0.758 0.735 PDF 0.769 0.675 2 0.756 0.658 0.572 0.497 0.743 0.731 0.718 0.706 0.593 0.650 0.574 0.435 0.329 0.250 0.541 0.398 0.292 0.215 0.510 0.641 0.624 0.609 0.524 0.364 Notice of 0.482 0.402 0.335 0.279 0.233 0.194 0.534 0.456 0.423 0.341 4 0.592 0.519 0.456 0.400 0.552 0.476 0.410 0.354 0.516 0.437 0.499 0.419 0.352 0.296 0.260 0.186 Appearance.pdf 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.390 0.333 0.275 0.222 0.179 0.227 0.178 0.139 0.108 6. 7 0.370 0.189 0.143 0.108 0.158 0.116 0.133 0.095 0.314 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.085 0.063 0.046 0.034 8 9. 0.249 0.209 0.176 0.148 0.124 0.104 0.351 0.308 0.305 0.263 0.227 0.195 0.266 0.225 0.191 0.162 0.068 0.048 0.144 0.082 0.270 0.237 0.208 0.182 0.162 0.135 0.112 10 11 0.085 0.066 0.062 0.047 0.116 0.035 0.025 0.018 0.013 0.094 0.168 0.145 0.125 0.108 0.093 0.080 0.052 0.040 12 0.076 0.061 0.036 0.027 0.021 0.016 0.025 0.137 0.116 13 0.093 0.018 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.019 0.049 0.040 0.032 0.026 0.021 0.017 0.032 0.025 0.019 0.015 0.014 0.010 0.007 0.009 0.006 0.005 0.003 14 15 0.160 0.140 0.123 0.108 0.141 0.123 0.107 0.088 0.078 0.065 0.054 0.045 0.038 0.031 0.074 16 17 0.012 0.009 0.007 0.005 0.062 0.093 0.081 0.070 0.061 0.035 0.005 0.004 0.003 0.002 0.001 0.052 18 19 0.095 0.083 0.069 0.060 0.059 0.051 0.043 0.023 0.044 0.037 0.012 0.009 0.007 0.003 0.002 0.001 0.000 0.000 0.002 0.002 0.001 0.000 20 24 0.073 0.043 0.051 0.028 0.031 0.015 0.026 0.013 0.014 0.006 0.004 0.001 0.030 0.015 0.004 0.001 0.020 0.009 0.002 0.000 0.010 0.004 0.001 0.000 0.005 0.002 0.000 0.000 0.000 0.000 0.000 0.000 25 30 0.038 0.020 0.024 0.012 0.016 0.007 0.013 0.005 0.001 0.000 0.000 0.000 BUS301A- 40 50 0.005 0.001 0.003 0.001 0.001 0.000 0.001 0.000 0.000 0.000 0.000 0.000 Discussion 4 60 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 APR 11 W X
Transcribed Image Text:Safari File Edit View History Bookmarks Window Help Mon Apr 11 7:01 PM + 88 00 cnow.apps.ng.cengage.com b MindTap - Cengage Learning table5a_2.jpg 710×953 pixels Таxes Work Force TABLE II Present Value Interest Factor (PVIF) ($1 at i % per period for n periods); PVIF = 1 ; PVo = FV,(PVIFi) (1+ i)"" Period, n 2% 3% 1.000 1.000 0.980 0.971 4% 5% 7% 1.000 8% 1.000 0.926 0.857 10% 11% 1.000 12% 1.000 1% 6% 9% 13% BUS300A 1.000 0.990 1.000 0.962 1.000 0.952 1.000 0.943 0.890 1.000 0.917 1.000 0.909 1.000 0.885 Photos 1 0.935 0.901 0.893 0.925 0.889 0.855 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.873 0.816 0.763 0.842 0.772 0.708 0.650 0.596 0.547 0.502 2 0.980 0.961 0.943 0.826 0.812 0.797 0.712 0.636 0.567 0.783 Screen Shot 0.840 0.792 0.794 0.735 0.731 0.659 0.693 0.613 3 0.971 0.942 0.915 0.961 0.751 0.683 0.924 0.889 2022-0...53.23 PM 0.713 0.666 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.951 0.906 0.863 0.942 0.822 0.790 0.747 0.705 0.665 0.627 0.592 0.558 0.621 0.564 0.593 0.535 0.543 0.480 0.888 0.838 0.507 0.623 0.582 0.425 0.376 7 0.933 0.923 0.871 0.813 0.853 0.789 0.760 0.731 0.513 0.482 0.452 0.404 0.361 0.467 0.434 BUS301A- BUS474A 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.837 0.766 9. 10 0.645 0.614 0.544 0.508 0.914 0.703 0.676 0.460 0.422 0.424 0.386 0.391 0.352 0.905 0.820 0.744 0.322 Integrati...lem.xlsx 0.585 0.557 0.350 0.319 11 0.896 0.887 0.804 0.722 0.650 0.527 0.497 0.469 0.442 0.475 0.388 0.356 0.326 0.299 0.317 0.286 0.287 12 0.788 0.701 0.625 0.444 0.257 0.415 0.388 0.362 0.339 0.317 0.296 0.276 0.258 0.197 0.184 0.290 0.263 0.258 13 14 0.879 0.870 0.861 0.853 0.844 0.836 0.773 0.681 0.758 0.661 0.601 0.577 0.530 0.505 0.229 0.205 0.232 15 16 0.743 0.642 0.728 0.623 0.714 0.605 0.700 0.587 0.555 0.534 0.513 0.494 0.275 0.252 0.239 0.218 0.198 0.209 0.188 0.183 0.163 0.481 0.417 0.394 0.371 0.350 0.331 0.312 0.247 0.233 0.174 0.097 0.054 0.030 0.458 17 18 0.436 0.416 0.396 0.377 0.310 0.295 0.231 0.270 0.250 0.170 0.153 0.146 0.130 0.212 0.180 0.111 0.232 0.215 0.158 0.146 19 20 0.686 0.570 0.673 0.554 0.475 0.456 0.828 0.820 0.788 0.622 0.492 0.780 0.610 0.478 0.194 0.178 0.126 0.116 0.164 0.149 0.102 0.092 0.138 0.116 0.104 0.098 0.087 0.124 0.082 0.074 2021.11.15 Letter 24 25 0.390 0.375 0.066 0.059 0.053 0.047 from CSEU 0.131 0.067 0.034 0.017 0.099 0.046 0.021 0.010 0.044 30 40 0.026 0.008 0.742 0.672 0.608 0.550 0.552 0.412 0.453 0.307 0.308 0.208 0.141 0.095 0.231 0.142 0.087 0.054 0.075 0.032 0.057 0.022 0.033 0.015 0.011 50 60 0.372 0.228 0.305 0.170 0.013 0.006 0.009 0.003 0.005 0.002 0.003 0.002 0.001 0.001 Period, n 14% 15% 16% 17% 18% 19% 20% 24% 28% 32% 36% 40% 1.000 0.877 1.000 1.000 0.862 1.000 1.000 0.847 1.000 0.840 1.000 0.833 0.694 0.579 1.000 0.806 1.000 0.781 0.610 0.477 0.373 0.291 1.000 1.000 1.000 0.714 1 0.870 0.855 0.758 0.735 PDF 0.769 0.675 2 0.756 0.658 0.572 0.497 0.743 0.731 0.718 0.706 0.593 0.650 0.574 0.435 0.329 0.250 0.541 0.398 0.292 0.215 0.510 0.641 0.624 0.609 0.524 0.364 Notice of 0.482 0.402 0.335 0.279 0.233 0.194 0.534 0.456 0.423 0.341 4 0.592 0.519 0.456 0.400 0.552 0.476 0.410 0.354 0.516 0.437 0.499 0.419 0.352 0.296 0.260 0.186 Appearance.pdf 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.390 0.333 0.275 0.222 0.179 0.227 0.178 0.139 0.108 6. 7 0.370 0.189 0.143 0.108 0.158 0.116 0.133 0.095 0.314 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.085 0.063 0.046 0.034 8 9. 0.249 0.209 0.176 0.148 0.124 0.104 0.351 0.308 0.305 0.263 0.227 0.195 0.266 0.225 0.191 0.162 0.068 0.048 0.144 0.082 0.270 0.237 0.208 0.182 0.162 0.135 0.112 10 11 0.085 0.066 0.062 0.047 0.116 0.035 0.025 0.018 0.013 0.094 0.168 0.145 0.125 0.108 0.093 0.080 0.052 0.040 12 0.076 0.061 0.036 0.027 0.021 0.016 0.025 0.137 0.116 13 0.093 0.018 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.019 0.049 0.040 0.032 0.026 0.021 0.017 0.032 0.025 0.019 0.015 0.014 0.010 0.007 0.009 0.006 0.005 0.003 14 15 0.160 0.140 0.123 0.108 0.141 0.123 0.107 0.088 0.078 0.065 0.054 0.045 0.038 0.031 0.074 16 17 0.012 0.009 0.007 0.005 0.062 0.093 0.081 0.070 0.061 0.035 0.005 0.004 0.003 0.002 0.001 0.052 18 19 0.095 0.083 0.069 0.060 0.059 0.051 0.043 0.023 0.044 0.037 0.012 0.009 0.007 0.003 0.002 0.001 0.000 0.000 0.002 0.002 0.001 0.000 20 24 0.073 0.043 0.051 0.028 0.031 0.015 0.026 0.013 0.014 0.006 0.004 0.001 0.030 0.015 0.004 0.001 0.020 0.009 0.002 0.000 0.010 0.004 0.001 0.000 0.005 0.002 0.000 0.000 0.000 0.000 0.000 0.000 25 30 0.038 0.020 0.024 0.012 0.016 0.007 0.013 0.005 0.001 0.000 0.000 0.000 BUS301A- 40 50 0.005 0.001 0.003 0.001 0.001 0.000 0.001 0.000 0.000 0.000 0.000 0.000 Discussion 4 60 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 APR 11 W X
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Stock Valuation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS