Exam (elaborations)
FIN 550FIN 550 Assignment 3.1/FIN 550: Corporate Financial Management Bartequa Blackmon Module 3 Assignment
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1. Turbo Technology Computers is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during next two years, at 13% in the third, and at a constant rate of 6% thereafter. Turbo’s last dividend was $1.15 and required rate or return on the stock is 12%. a. Calculate the value of the stock today. D1 = D0 (1 + gl) = $1.15 (1 + 0.06) = $1.22 P ^ 0 = D1/ (rs – gl) = 1.22/ (.15 - .06) = $13.56 b. Calculate P1 ^ and P2 ^ . P1 ^ = D2 / (rs – gl) = 1.52 / (.15 -.06) = $16.89 P2 ^ = D3 / (r2 – g1) = 1.72 (.15 - 06) = $19.11 c. Calculate the dividend years and capital gains yield for year 1, 2, and 3
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Institution
Southern New Hampshire University
Course
FIN 550
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Southern New Hampshire University
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FIN 550
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