Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D0 = $2 and rs = 14%,
What is the value of Martell Mining's stock? Round your answer to two decimal places. $
Investors require a 17% rate of return on Levine Company's stock (that is, rs = 17%).
0.
=2*(1-5%)/(14%-(-5%))=10.00000
1.
=2.25*(1-4%)/(17%-(-4%))=10.2857142857143
2.
=2.25*(1+0%)/(17%-0%)=13.2352941176471
3.
=2.25*(1+6%)/(17%-6%)=21.6818181818182
4.
=2.25*(1+12%)/(17%-12%)=50.4
5.
The results show that the formula does not make sense if the
required rate of return is equal to or less than the expected
growth rate.
6.
It is not reasonable for a firm to grow indefinitely at a rate
higher than its required return.
Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting dee...
Valuation of a constant growth stock Investors require a 18% rate of return on Levine Company's stock (i.e., rs = 18%). What is its value if the previous dividend was D0 = $2.50 and investors expect dividends to grow at a constant annual rate of (1) -2%, (2) 0%, (3) 3%, or (4) 14%? Round your answers to two decimal places. (1) $ (2) $ (3) $ (4) $ Using data from part a, what would the Gordon (constant growth)...
Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 7% per year. If D0 = $2 and rs = 18%-----What is the value of Martell Mining's stock?
Investors require a 7% rate of return on Mather Company's stock (i.e., rs = 7%). What is its value if the previous dividend was D0 = $2.75 and investors expect dividends to grow at a constant annual rate of (1) -5%, (2) 0%, (3) 4%, or (4) 5%? Do not round intermediate calculations. Round your answers to the nearest cent. (1) $ (2) $ (3) $ (4) $ Using data from part a, what would the Gordon (constant growth) model...
Investors require an 8% rate of return on Mather Company's stock (i.e., rs = 8%). What is its value if the previous dividend was D0 = $3.00 and investors expect dividends to grow at a constant annual rate of (1) -4%, (2) 0%, (3) 2%, or (4) 6%? Do not round intermediate calculations. Round your answers to the nearest cent. (1) $ (2) $ (3) $ (4) $ Using data from part a, what would the Gordon (constant growth) model...
Investors require a 7% rate of return on Mather Company's stock (i.e., rs = 7%). a. What is its value if the previous dividend was Do = $2.00 and investors expect dividends to grow at a constant annual rate of (1) -3%, (2) 0%, (3) 3%, or (4) 5%? Do not round intermediate calculations. Round your answers to the nearest cent. (1) $ (2) $ (4) $ b. Using data from part a, what would the Gordon (constant growth) model...
Problem 9-12 Valuation of a constant growth stock Investors require a 18% rate of return on Levine Company's stock (that is, rs = 18%). a. What is its value if the previous dividend was Do = $1.00 and investors expect dividends to grow at a constant annual rate of (1) -4%, (2) 0%, (3) 4%, or (4) 12%? Round answers to the nearest hundredth. (1) $ (2) $ (3) $ (4) $ b. Using data from part a, what would...
Investors require an 3% rate of return on Mather Company's stock (lets - 8%). 3. What is its value if the previous dividend was Do = $3.00 and investors expect dividends to grow at a constant annual rate of (1) -3%, (2) 0%, (3) 4%, or (4) 69? Do not round Intermediate calculations. Round your answers to the nearest cent. (2) b. Using data from part a, what would the Gordon (constant growth) model value be if the required rate...
WORK tool Problem Walk-Through Investors require an 8% rate of return on Mather Company's stock (i.e., rs = 8%). a. What is its value if the previous dividend was Do - $1.50 and investors expect dividends to grow at a constant annual rate of (1) -6%, (2) 0%, (3) 3%, or (4) 7%? Do not round intermediate calculations. Round your answers to the nearest cent. (1) $ (2) $ (3) $ 10. b. Using data from part a, what would...
Problem 9-12 Valuation of a constant growth stock Investors require a 15 % rate of return on Levine Company's stock (1.e.., rs 15 % ) . a. What is its value if the previous dividend was Do- $1.50 and investors 12% 7 Round your answers to two decimal places. expect dividends to grow at a constant annual rate of (1) -3%, (2) 0 % , ( 3) 26 , or ( 4) (1) O (2) $ (3) (4) $ O...
Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D0 = $3 and rs = 14%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent. $