Question

AVZ is a​ start-up company who is using all its cash to growth so it does...

AVZ is a​ start-up company who is using all its cash to growth so it does not plan to pay dividends for the next 5 years. The company then plans to start paying annual cash dividends starting in year 6 of ​$5.00 for 12 years. ​ Thereafter, the company will assume a constant growth dividend policy and the estimated growth rate in dividends forever after that point is 4​%. The price of the stock is set to yield a return of 11​%. What is the price of this stock​ today?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Dividend fro Year-18= 5+4% = 5.20
Price at the end of Year-17 = Dividend of Year-18 /(Required rate-Growth rate)%
5.20 / (11-4)% = 74.29
Year cashflows PF at 11% Present Value
1 0 0.900901 0
2 0 0.811622 0
3 0 0.731191 0
4 0 0.658731 0
5 0 0.593451 0
6 5 0.534641 2.673204
7 5 0.481658 2.408292
8 5 0.433926 2.169632
9 5 0.390925 1.954624
10 5 0.352184 1.760922
11 5 0.317283 1.586417
12 5 0.285841 1.429204
13 5 0.257514 1.287571
14 5 0.231995 1.159974
15 5 0.209004 1.045022
16 5 0.188292 0.941461
17 79.29 0.169633 13.45017
(5+74.29)
Present value 31.87
Stock price today = 31.87
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
AVZ is a​ start-up company who is using all its cash to growth so it does...
AVZ is a​ start-up company who is using all its cash to growth so it does not plan to pay dividends for the next 5 years. The company then plans to start paying annual cash dividends starting in year 6 of ​$6.00 for 12 years. ​ Thereafter, the company will assume a constant growth dividend policy and the estimated growth rate in dividends forever after that point is 4​%. The price of the stock is set to yield a return...
Joven Corp. is a young start-up company and therefore is not paying any dividends on the...
Joven Corp. is a young start-up company and therefore is not paying any dividends on the stock over the next 10 years. The company will start paying a $3 per share dividend at the end of year 11 and thereafter it will increase the dividends by 3% per year forever. If the required rate of return on this stock is 9%, what is the current (today’s) share price? Question 10 options: 17.08 23.02 21.12 25.00 20.00 12.71 14.64 22.22 30.01
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $10 per share annual dividend 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required annual return on this stock is 11 percent, what is the current share price?
EarlyOne Inc. is start-up company and therefore is not paying dividends for the next 7 years....
EarlyOne Inc. is start-up company and therefore is not paying dividends for the next 7 years. At the following year, EarlyOne will start paying an annual dividend of $9 per share per year until year 15. Thereafter, it will increase the dividends by 3% per year forever. If the required rate of return on this stock is 10%, what is the price of this stock today? Do not use the $ sign. Use commas to separate thousands. Use to decimals....
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 13 years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $13 per share 14 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 12 percent, what is the current share price?
Far Side Corporation is a young start-up company. No dividends will be paid on the stock...
Far Side Corporation is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $17 per share 10 years from today and will increase the dividend by 3.9 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $9.4 per share dividend 10 years from today and will increase the dividend by 4.9 percent per year thereafter. If the required return on this stock is 8.96 percent, what is the current share price?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 14 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $8 per share dividend in 15 years and will increase the dividend by 7 percent per year thereafter. If the required return on this stock is 11 percent, what is the current share price?
AI Inc., an artificial intelligence company is a young start-up company. No dividends will be paid...
AI Inc., an artificial intelligence company is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to reinvest its earnings to sustain its growth. The company will pay a dividend of $19 per share, 10 years from today and will increase the dividend by 4% per year thereafter. If the required return on this stock is 13%, what is the current share price? please use excel
Metallic Bearings is a young start-up company. The firm plans to pay the following dividends -...
Metallic Bearings is a young start-up company. The firm plans to pay the following dividends - $9 in Year 1, $4 in Year 2 and $1 in Year 3. There will be no dividends paid on the stock over the next 9 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $17.50 per share in Year 13 and will increase the dividend by 5.5% per year thereafter. Required:...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT