Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 15, Problem 12QP
Summary Introduction
To find: The subscription price.
Introduction:
The public issue of securities, in which the securities are generally at an initial stage, offered to the owners or the existing shareholders of the company is a right offer.
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A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
I have attatched two related pictures to calculate a value of a compay using a DCF model. Please show how to get residual value like in the picture shown.
A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
Chapter 15 Solutions
Fundamentals of Corporate Finance
Ch. 15.1 - Prob. 15.1ACQCh. 15.1 - Prob. 15.1BCQCh. 15.2 - What are the basic procedures in selling a new...Ch. 15.2 - What is a registration statement?Ch. 15.3 - Prob. 15.3ACQCh. 15.3 - Why is an initial public offering necessarily a...Ch. 15.4 - Prob. 15.4ACQCh. 15.4 - Prob. 15.4BCQCh. 15.5 - Prob. 15.5ACQCh. 15.5 - Suppose a stockbroker calls you up out of the blue...
Ch. 15.6 - What are some possible reasons why the price of...Ch. 15.6 - Explain why we might expect a firm with a positive...Ch. 15.7 - What are the different costs associated with...Ch. 15.7 - What lessons do we learn from studying issue...Ch. 15.8 - Prob. 15.8ACQCh. 15.8 - What questions must financial managers answer in a...Ch. 15.8 - Prob. 15.8CCQCh. 15.8 - When does a rights offering affect the value of a...Ch. 15.8 - Prob. 15.8ECQCh. 15.9 - What are the different kinds of dilution?Ch. 15.9 - Is dilution important?Ch. 15.10 - What is the difference between private and public...Ch. 15.10 - Prob. 15.10BCQCh. 15.11 - What is shelf registration?Ch. 15.11 - Prob. 15.11BCQCh. 15 - Prob. 15.1CTFCh. 15 - Smythe Enterprises is issuing securities under...Ch. 15 - Prob. 15.4CTFCh. 15 - Prob. 15.7CTFCh. 15 - Debt versus Equity Offering Size [LO2] In the...Ch. 15 - Debt versus Equity Flotation Costs [LO2] Why are...Ch. 15 - Bond Ratings and Flotation Costs [LO2] Why do...Ch. 15 - Underpricing in Debt Offerings [LO2] Why is...Ch. 15 - Prob. 5CRCTCh. 15 - Prob. 6CRCTCh. 15 - Prob. 7CRCTCh. 15 - Prob. 8CRCTCh. 15 - Prob. 9CRCTCh. 15 - Prob. 10CRCTCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Rights [LO4] Red Shoe Co. has concluded that...Ch. 15 - Prob. 4QPCh. 15 - Calculating Flotation Costs [LO3] The Valhalla...Ch. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Dilution [LO3] Eaton, Inc., wishes to expand its...Ch. 15 - Prob. 10QPCh. 15 - Dilution [LO3] In the previous problem, what would...Ch. 15 - Prob. 12QPCh. 15 - Value of a Right [LO4] Show that the value of a...Ch. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 1MCh. 15 - Prob. 2MCh. 15 - Prob. 3MCh. 15 - Prob. 4M
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