Suppose the discount rate is 8%, the expected growth rate of the firms profit is 5%, and the firm is expected to continue forever. If the current profit is $40,000, what is the value of the firm?
Next year's profit = $40,000 x 1.05 = $42,000
Value of firm ($) = Next year's profit / (Discount rate - Profit growth rate)
= $42,000 / (0.08 - 0.05)
= $42,000 / 0.03
= $1,400,000
Suppose the discount rate is 8%, the expected growth rate of the firms profit is 5%,...
Suppose the growth rate of the firm's profit is 7 percent, the interest rate is 10 percent, and the current profits of the firm are $120 million. What is the value of the firm?
5. (5 marks) Flueaw Co. has a dividend growth rate of 35% per year. The discount rate is 10%. The end- of-year dividend will be $4 per share. a) What is the present value of the dividend to be paid in year 1? In year 2? In year 3? (3 marks) b) Could anyone rationally expect this growth rate to continue forever? Why? (2 marks)
The last dividend paid by GM was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firms required return (rs) is 11% in Years 1 and 2 and then increases to 13% thereafter and (rs) remains at 13% indefinitely. What is the stocks current price?
Assume an interest rate of 5% and the future firm’s profit growth rate of 3%. Given that current profits are $150 million, then What's the value of the firm? What's the value of the firm after paying dividends equal to its current profits? Please show calculations.
When calculating a growing perpetuity, the growth rate is expected to continue forever. Therefore it should not exceed... a. the growth rate of the population in the economy. b. the growth rate of productivity in the economy. c. the growth rate of the general economy (growth in real GDP). d. the return on a large portfolio of stocks from the economy. What is the present value of a growing perpetuity with an expected cash flow of 1,000 next year, a...
Grandiose Growth has a dividend growth rate of 10%. The discount rate is 8%. The end- of-year dividend will be $5 per share. a. What is the present value of the dividend to be paid in year 1? Year 2? Year 3? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Present Value Year 1 Year 2 Year 3
Q4. Suppose a duopoly is characterized by the following profits: if the two firms collude and charge the joint profit-maximizing price, they each earn a profit equal to 1500 in each period; if the two firms charge the Cournot–Nash price, they each earn a profit equal to 1200 in each period; and if one firm defects while the other charges the joint profit-maximizing price, the firm that defects earns 3000 and the other earns 0. [20 marks] a) [3 marks]...
5. [Ch 9] Primanti Brothers' last dividend was $1.50. The dividend growth rate is expected to be constant at 20% for 3 years, after which dividends are expected to grow at a rate of 5% forever. If the firm's required return (rs) is 10%, what is its current (expected) stock price? [Note: A timeline will be very helpful here!]
The last dividend paid by ABC, Inc. was $1.00. ABC's growth rate is expected to be 0 for two years, after which dividends are expected to grow at a rate of 3% forever. The required rate of return is 8%. What is the current price of the stock?
(12 Marks) Question 6 James Limited's earnings and dividends have been growing at a rate of 10% per annum. This growth rate is expected to continue for 3 years ( 2019,2020 and 2021). After that the growth rate will fall to 5% per annum for the next 2 years. Thereafter, the growth rate is expected to be 6 % forever. The company just paid out dividend per share of N$3.50 in 2018 and the investors' required rate of return on...