Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 pe
ID: 2740259 • Letter: Y
Question
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6.5 percent thereafter. The required return is 13 percent and the company just paid a $3.00 dividend.
What are the dividends each year for the next four years? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)
What is the share price in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6.5 percent thereafter. The required return is 13 percent and the company just paid a $3.00 dividend.
Explanation / Answer
Particulars Amount Year 1 = 3*1.30 3.9000 Year 2 = 3.9*1.3 5.0700 Year 3 = 5.07*1.3 6.5910 Year 4 =6.591 * 1.065 7.0194 P3= D4/ke-g P3 = 7.0194/(13%-6.5%) P3 = 7.0194/(6.5%) P3 = 107.99 Statemnet showing Current Price Particulars Time PVf@13% Amount PV Cash inflows (Dividend) 1.00 0.8850 3.9000 3.45 Cash inflows (Dividend) 2.00 0.7831 5.0700 3.97 Cash inflows (Dividend) 3.00 0.6931 6.5910 4.57 Cash inflows (Price) 3.00 0.6931 107.9910 74.84 Current Price of Stock 86.83
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