ZuoTi.Pro
Question

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 dividend of $15 per share 10 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 14.5 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Value at year 9 = D10 / required rate - growth rate

Value at year 9 = 15 / 0.145 - 0.05

Value at year 9 = 15 / 0.095

Value at year 9 = 157.894737

Current share price = FV / (1 + r)n

Current share price = 157.894737 / (1 + 0.145)9

Current share price = 157.894737 / 3.38259

Current share price = $46.68

0 1
Add a comment
Know the answer?
Add Answer to:
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
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. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 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 $14 per share dividend 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 14 percent, what is the current share price? (Do not round intermediate calculations and round...

  • 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 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? (Do not round intermediate calculations and...

  • 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 $14 per share dividend 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price? (Do not round intermediate calculations and round...

  • 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 dividend of $14 per share 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 14 percent, what is the current share price? (Do not round intermediate calculations and...

  • 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 then pay a dividend of $13.25 per share 10 years from today and will increase the dividend by 5.00 percent per year thereafter. Required: If the required return on this stock is 13.00 percent, what is the current share price? (Do not round intermediate...

  • 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 dividend of $10 per share in 10 years and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 11.5 percent, what is the current share price? (Do not round intermediate calculations and round...

  • 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 dividend of $20 per share in 10 years and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 10 percent, what is the current share price? (Do not round intermediate calculations and round...

  • 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 dividend of $20 per share exactly 10 years from today and will Increase the dividend by 4 percent per year thereafter. If the required return on this stock is 10 percent, what is the current share price? (Do not round Intermediate calculations...

  • 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 dividend of $12 per share 10 years from today and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 12 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 $14 per share dividend 10 years from today and will increase the dividend by 8 percent per year thereafter. If the required return on this stock is 14 percent, what is the current share price?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT