1 answer

As companies evolve, certain factors can drive sudden growth. This may lead to a period of...

Question:

As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth.

As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.60 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Value $4.1760 The risk-free rate (rap) is 4.00%, the market risk premium (RPM) is 4.80%, and Portman's beta is 1.20. Term Dividends one year from now (D) Horizon value (1) Intrinsic value of Portman's stock Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? 6.56% 6.36% 6.98% 5.25% O O

Answers

1-a. r = rF + [Beta * RPm]

= 4% + [1.20 * 4.80%]

= 4% + 5.76% = 9.76%

D1 = D0 * (1 + g1) = $3.60 * (1 + 0.16) = $4.176

1-b. P1 = [D1 * (1 + gC)] / [r - gC]

= [$4.176 * (1 + 0.032)] / [0.0976 - 0.032] = $4.3096 / 0.0656 = $65.70

1-c. P0 = [D1 + P1] / [1 + r]

= [$4.176 + $65.70] / [1 + 0.0976] = $69.87 / 1.0976 = $63.66

2). Expected Dividend Yield = D1 / P0 = $4.176 / $63.66 = 0.0656, or 6.56%

So, 1st option is correct.

.

Similar Solved Questions

1 answer
We were unable to transcribe this imageFinancial Management 1 BFIN 2409 Spring-1, 2019 Question 4 40...
We were unable to transcribe this imageFinancial Management 1 BFIN 2409 Spring-1, 2019 Question 4 40 Points This question requires that you complete and then print and attach the Excel file entitled "HW#1 _Template-Spring201 9.xlsx" found on Courseweb The Strathman Corporation, a metal formi...
1 answer
The Downtown Parking Authority of Tampa, Florida, reported the following information for a sample of 307...
The Downtown Parking Authority of Tampa, Florida, reported the following information for a sample of 307 customers on the number of hours cars are parked and the amount they are charged. Number of Hours Frequency OWN Amount Charged $ 4.00 5.00 6.00 8.00 10.00 12.00 13.00 16.00 (a-1) Convert the info...
1 answer
Kind, Inc., an exempt organization, leases land, a building, and factory equipment to Shirts, Inc. Shirts...
Kind, Inc., an exempt organization, leases land, a building, and factory equipment to Shirts, Inc. Shirts is a taxable entity that manufactures shirts for distribution through its factory outlet stores. The rent income and the related expenses for Kind are as follows: Rent Income Rent Expens...
1 answer
Problem 2: For the beam shown below: 16.0 kN/m 8.0 kN/m 16.8 mm 354 mm 9.4...
Problem 2: For the beam shown below: 16.0 kN/m 8.0 kN/m 16.8 mm 354 mm 9.4 mm 50 kN 205 mm 4.0 m Beam Cross Section 4.0 m 4.0 m (a) Draw and label the axial, shear, and bending moment diagrams for the beam. (b) Determine the location and magnitude of maximum forces in the beam (axial, shear, and mom...
1 answer
Prove the following Hermite polynomial property H2,(0) = (-1)" (2n)!
prove the following Hermite polynomial property H2,(0) = (-1)" (2n)!...
1 answer
QUESTION 18 What is the formal charge on the atom the arrow points to? СІ C-A-C-CHE...
QUESTION 18 What is the formal charge on the atom the arrow points to? СІ C-A-C-CHE CI What is the formal charge on the atom the arrow points to? CI C-A1-C1-CHE CI 02 00 0.1...
1 answer
Question: Analyse the efficiency of transmitting power using a solid shaft of diameter "d" compared to...
Question: Analyse the efficiency of transmitting power using a solid shaft of diameter "d" compared to a hollow shaft of diameters "Do" and "Di". The ratio "r" = Do/Di should be varied from 1.5, 1.6, 1.7, 1.8; 1.9; and 2.0 but the weight of the hollow shaft must be eq...
1 answer
PLEASE SHOW CLEAR AND NEAT WORK 7) (35 points) EmKay, Inc. is considering the purchase of...
PLEASE SHOW CLEAR AND NEAT WORK 7) (35 points) EmKay, Inc. is considering the purchase of new automated equipment to increase its production capacity. For this purchase, the following data apply: Purchase price = $450,000 {$250,000 from own funds (equity) and $200,000 from a loan} Equipment Life: 4 ...
1 answer
In an ice show a 65.0 kg skater leaps into the air and is caught by...
In an ice show a 65.0 kg skater leaps into the air and is caught by an initially stationary 70.0 kg skater. (a) What is their final velocity assuming negligible friction and that the leaper's original horizontal velocity was 4.00 m/s? (b) How much kinetic energy is lost? J...
1 answer
What is the difference between community health promotion and individualize health promotion?
What is the difference between community health promotion and individualize health promotion?...
1 answer
Please answer all parts of questions (20 to 26) 20: Make use of the following information...
Please answer all parts of questions (20 to 26) 20: Make use of the following information for calculating the electron Affinity of C AH = -216 kJ A H2 249 kJ AH3 = + 240 kJ A H4 ? A H5 786 kJ A Ho-411 kJ 1: 2Na 2: ½ Na(g 3: Cl2() 4: Cl eg) 5: Na () Cl 6: Nas 2Nas ½ Na () 2Ck Deposition...
1 answer
2. A bug on the windowsill walks at 10mm/s from left to right for 120mm, slows...
2. A bug on the windowsill walks at 10mm/s from left to right for 120mm, slows to 6.0mm/s and continues rightward for another 3.0s, stops for 4.0 s, and then walks back to its starting position at 8.0 mm/s. Draw a graph of: a. The x-coordinate of the bug's displacement as a function of time b. T...
1 answer
Need hypothesis, p-value and conclusion 6:39 LTE O Classes Obe r gence - Hist. SCP :...
Need hypothesis, p-value and conclusion 6:39 LTE O Classes Obe r gence - Hist. SCP : determine the population Charact Step 2 Win the hupotries Hathur S Significant d onc belucon the distribution I ect the distribution Tobserve in the sample Har there is a Sanicant difference Step 3: LOCO S...
1 answer
Discuss the nurses role in health promotion.
Discuss the nurses role in health promotion....
1 answer
Please provide your opinion with this discussion and give example. I believe that there should be...
please provide your opinion with this discussion and give example. I believe that there should be a warning for headphones and other devices that play music at a loud range. I know when I try and turn my cell phone up while listening to it with head phones it gives me a warning message. Other devic...
1 answer
Isprv 8idrc-18iqi 238448 nb:0 Spirituality Quiz st. Length: 0:15:00 Evelyn Bonney: Attempt 1 age 1: Question...
isprv 8idrc-18iqi 238448 nb:0 Spirituality Quiz st. Length: 0:15:00 Evelyn Bonney: Attempt 1 age 1: Question 1 (1 point) In the required reading article by Boswell, Cannon, and Miller entitled, Students Perceptions of Holistic Nursing Care," what research methodology was used to determine nurses...
1 answer
1. Balance: Describe the reactants. Describe the products. What is the evidence of reaction? Classify by...
1. Balance: Describe the reactants. Describe the products. What is the evidence of reaction? Classify by the type of reaction. 2. Balance: CuSO4 (aq) + Zn (s) -→ Znso4 (aq) + Cu (s) Describe the reactants. Describe the products What is the evidence of reaction? Classify by the type of reaction....
1 answer
Chapter 02, Problem 048 SN A hoodlum throws a stone verticallly downward with an initial speed...
Chapter 02, Problem 048 SN A hoodlum throws a stone verticallly downward with an initial speed v, from the roof of a building, a height h above the ground. (a) How long does it take the stone to reach the ground? (b) What is the speed of the stone at impact? Give your answers in terms of the given v...