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Assume that it is now January 1, 2019. Wayne-Martin Electric Inc. (WME) has developed a solar panel capable of generating 200% more electricity than any other solar panel currently on the market. As a result, WME is expected to experience a 14% annual growth rate for the next 5 years. Other firms will have developed comparable technology by the end of 5 years, and WME's growth rate will slow to 6% per year indefinitely. Stockholders require a return of 11% on WME's stock. The most recent annual dividend (D₀), which was paid yesterday, was $1.92 per share.

1. Calculate WME's expected dividends for 2019, 2020, 2021, 2022, and 2023. Do not round intermediate calculations. Round your answers to the nearest cent.
   

   D₂₀₁₉ = $  

   D₂₀₂₀ = $  

   D₂₀₂₁ = $  

   D₂₀₂₂ = $  

   D₂₀₂₃ = $  

2. 
   
3. Calculate the value of the stock today, . Proceed by finding the present value of the dividends expected at the end of 2019, 2020, 2021, 2022, and 2023 plus the present value of the stock price that should exist at the end of 2023. The year end 2023 stock price can be found by using the constant growth equation. Notice that to find the December 31, 2023, price, you must use the dividend expected in 2024, which is 6% greater than the 2023 dividend. Do not round intermediate calculations. Round your answer to the nearest cent.
   $   
   
4. Calculate the expected dividend yield (D₁/P₀), capital gains yield, and total return (dividend yield plus capital gains yield) expected for 2019. (Assume that    and recognize that the capital gains yield is equal to the total return minus the dividend yield.) Do not round intermediate calculations. Round your answers to two decimal places.

   D₁/P₀ =   %

   Capital gains yield =   %

   Expected total return =   %

   Then calculate these same three yields for 2024. Do not round intermediate calculations. Round your answers to two decimal places.

   D₆/P₅ =   %

   Capital gains yield =   %

   Expected total return =   %

Answer 1

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File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut Ea Copy AutoSum A A General Wrap Text Calibri 11 Fill A Merge & Center Insert Delete Format Paste BIU S % Conditional Format Cell Sort & Find & Format Painter Clear Formatting ble Styles er Select Clipboard Font Alignment Number Shules Cells Editing BA522 BC BF AX AY AZ BA BB BD BE BG BH 522 WME ROUNDED TO 2 DECIMALS 523 A DO 1.92 2.1888 1.92 (1+0.14) 524 2,19 2019 D1 525 2020 D2 2.4952 2.1888*(1+0.14) 2,50 526 2.8446 SAME WAY FOR 2.84 2021 D3 527 2022 D4 3.2428 OTHER YEARS 3.24 528 2023 D5 3.6968 3.70 529 3.9186 3.6968* (1+0.06) 2024 D6 3.92 530 P5 D6/(ke-g) = 3.9186/(0.11-0.06)= 531 78.37 532 533 PRICE OF STOCK TODAY PV FACTOR @11% 534 PV OF ALL CASH FLOW 535 1.97 D1 2.1888 0.9009 536 2.03 D2. 2.4952 0.8116 537 D3 2.8446 0.7312 2.08 538 3.2428 D4 0.6587 2.14 539 0.5935 D5P5 82.0689 48.70 3.696878.37] 540 56.92 541 PO KE CAPM UTILITY, SHARPE, beta bond covexty DGM RESI ex d cap stru WACC 120%% O port future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfoio Re erences: A1310 10:33 W AENG 8-06-2019

File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum A A General Wrap Text Calibri 11 Fill Copy BI Insert Delete Format A Merge & Center Conditional Format Formatting Paste S % Cell Sort & Find & Format Painter Clear ble Styles er Select Clipboard Font Alignment Number Shules Cells Editing BA561 AX AY AZ BA BB BC BD BE BF BG BH 542 3.35% [ 2.1888/56.92] 543 2019 DIVIDEND YIELD D1/PO = CAPITAL GAIN YIELD = TOTAL RETURN - DIVIDEND YIELD 11 %-3.85% EXPECTED TOTAL RETURN 3.85% +7.15 % C 544 7.15% 11.00% 545 546 547 2024 ONCE THE ABNORMAL GROWTH PERIOD IS OVER, WE HAVE CONSTANT DIVIDEND & CAPITAL GAIN YIELD, so WE USE HERE 2023 DATA, THE ANSWER WILL BE ALSO SAME FOR 2024 548 5.00% [ 3.9186/78.37 DIVIDEND YIELD D6/P5 D(2024)/P(2023) = CAPITAL GAIN YIELD = TOTAL RETURN DIVIDEND YIELD = 11 % -5.00 % = EXPECTED TOTAL RETURN 5.00% + 6.00 % 549 550 6.00% 11.00 % 551 552 553 554 555 556 557 558 559 560 561 port future INDEX PV, FV, ANNUITYDIR right HKE CAPM UTILITY, SHARPE, beta bond covexityDGM LEASING RESI ex d cap stru WACC 120%% O INTL CAP BUD cean YIELD bond portfoio Re erences: A1310 10:33 W AENG 8-06-2019