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Pie
4 years ago
15

Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, the

n a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.45 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22 percent, what is the current value of the stock?
Business
1 answer:
nordsb [41]4 years ago
4 0

Answer:

Value = $23.35

Explanation:

First, find dividend per year using the growth rates given;

D1 = 2.45

D2 = 2.45 (1.30) = 3.185

D3 = 3.185 (1.17) = 3.7265

D4 = 3.7265 (1.17) = 4.3600

D5= 4.3600(1.08) = 4.7088

Next, find the PV of each dividend;

PV(D1) = 2.45 / (1.22) = 2.0082

PV(D2) = 3.185 /(1.22²) = 2.1399

PV(D3) = 3.7265/ (1.22³) = 2.0522

PV(D4) = 4.3600/ (1.22^4) = 1.9681

PV(D5) = \frac{\frac{4.7088}{0.22-0.08} }{1.22^{4} } =  15.1825

Next, sum up the present values to find the current value of the stock;

=2.0082+ 2.1399 + 2.0522 + 1.9681 + 15.1825

Value = $23.35

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4 0
2 years ago
Which of the following measures the percentage change in earnings before interest and tax(or operating cash flow) associated wit
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Answer:

1. Measure of the percentage change in earnings before interest and tax or operating cash flow:

B) Degree of operating leverage

2. P/E Ratio of 10 indicates that:

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Explanation:

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3 years ago
Precision Aviation had a profit margin of 7.00%, a total assets turnover of 1.4, and an equity multiplier of 1.8. What was the f
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Answer:

17.64%

Explanation:

Precision aviation has a profit margin of 7%

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3 years ago
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3 years ago
A major purpose of a cost accounting system is to _____
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Answer:

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