Computech Corporation is
expanding rapidly and currently needs to retain all of its
earnings; hence, it does not pay dividends. However, investors
expect Computech to begin paying dividends, beginning with a
dividend of $0.75 coming 3 years from today. The dividend should
grow rapidly - at a rate of 25% per year - during Years 4 and 5;
but after Year 5, growth should be a constant 8% per year. The data
has been collected in the Microsoft Excel Online file below. Open
the spreadsheet and perform the required analysis to answer the
question below. Open spreadsheet If the required return on
Computech is 12%, what is the value of the stock today? Round your
answer to the nearest cent. Do not round your intermediate
calculations.
Dear Student Lets understand and summaraise the question | ||||||
Year 3 Dividend | 0.75 | |||||
Super normal growth in Year 4 and year 5 | 25% | |||||
Normal Growth | 8% | |||||
Required Rate of Return | 12% | |||||
Particulars | Y1 | Y2 | Y3 | Y4 | Y5 | Y6 |
Dividend | 0 | 0 | 0.75 | 0.9375 | 1.171875 | 1.265625 |
Market Value | 31.64063 | |||||
Total Return | 0 | 0 | 0.75 | 0.9375 | 1.171875 | 32.90625 |
PVF @12% | 0.893 | 0.797 | 0.712 | 0.636 | 0.567 | 0.507 |
Present Value | 0 | 0 | 0.534 | 0.59625 | 0.664453 | 16.68347 |
Present value of stock | 18.47817 |
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it...
Computech Corporation is expanding rapidly and currently needs
to retain all of its earnings; hence, it does not pay dividends.
However, investors expect Computech to begin paying dividends,
beginning with a dividend of $1.50 coming 3 years from today. The
dividend should grow rapidly - at a rate of 26% per year - during
Years 4 and 5; but after Year 5, growth should be a constant 6% per
year. The data has been collected in the Microsoft Excel Online...
Computech Corporation is expanding rapidly and currently needs
to retain all of its earnings; hence, it does not pay dividends.
However, investors expect Computech to begin paying dividends,
beginning with a dividend of $0.75 coming 3 years from today. The
dividend should grow rapidly - at a rate of 29% per year - during
Years 4 and 5; but after Year 5, growth should be a constant 9% per
year. The data has been collected in the Microsoft Excel Online...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 40% per year - during Years 4 and 5; but after Year 5, growth should be a constant 7% per year. The data has been collected in the Microsoft Excel Online...
A-Z Computech Corporation is expanding rapidly and currently needs to retain all of its eamings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 46% per year during Years 4 and 5; but after Year 5. growth should be a constant 9% per year. The data has been collected in the Microsoft Excel Online...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly-at a rate of 22% per year-during Years 4 and 5; but after Year 5, growth should be a constant 9% per year. If the required return on Computech is 17%, what is the value of the...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 26% per year - during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 16%, what is...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 50% per year - during Years 4 and 5, but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 17%, what is...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 50% per year - during Years 4 and 5, but after Year 5, growth should be a constant 8% per year. If the required return on Computech is 15%, what is...
9.12
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly at a rate of 38% per year - during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 14%, what is...
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 49% per year - during Years 4 and S, but after Year S. growth should be a constant 6% per year. If the required return on Computech is 18%, what is...