(72) Constant gain paygrade Boehm Incorpo ordaind is expected to pay a $1.50 per parcel divid termination at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant tread of 7% a year. The supplicate straddle of call in on the live profligate, rs, is 15%. What is the value per lulu out of Boehms computer memory? Answer Price = $1.50 / (0.15 - 0.07) = $18.75 Im doing this chapter salutary now, and this problem was in this weeks homework. Heres how I did it: Using the formula in our book, I sign on 1.50 multiply it by 1 + the 7% growth rate and nark 1.5 (1.07) = 1.605 Now, I ask to go to part twain of the formula. I take what I just got and divide by the essential rate of reach minus the growth rate: (1.50)(1.07) /(.15 - .07) = 1.605 / .08 = 20.0625 or $20.63 (1.50 X 1) + the 7% growth rate and get 1.5 (1.07) = 1.605 (1.50)(1.07) /(.15 - .07) = 1.605 / .08 = 20.0625 or $20.63 (74)Preferred Stock military rating Nicks Enchiladas Incorporated has preferent stock great that pays a dividend of $5 at the end of each year. The preferred sells for $50 a office. What is the stocks required rate of return? Answer $5/$50 = 10% (75) Nonconstant Growth Valuation A familiarity lively pays a dividend of $2 per portion (D0 = $2).
It is estimated that the companys dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The companys stock has a beta of 1.2, the take chancesfree rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stocks curren t price? Problems (p. 371) (92) After-! Tax personify of Debt LL Incorporateds currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its peripheral tax rate is 35%, what is LLs after-tax cost of debt? (94) Cost of Preferred Stock with Flotation Costs Burnwood technical instruct plans to issue some $60 par preferred stock with a 6% dividend. A...If you want to get a knowing essay, order it on our website: OrderCustomPaper.com
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