Mathematics: 1) The Pet Company has recently discovered a type of rock which, when crushed, is extremely absorbent. It is expected that the firm will experience (beginning now) an unusually high growth rate (20%) during the period (3 years) when it has exclusive rights to the property where this rock can be found. However, beginning with the fourth year the firm s competition will have access to the material, and from that time on the firm will assume a normal growth rate of 8% annually. During the rapid growth

The answers are 2.08×10^(-1) and 8.052×10^6...

1) The Pet Company has recently discovered a type

quesorules7101

28.01.2022

$ 71.83

Step-by-step explanation:

This year's earnings=last year's earnings*(1+growth rate)=$2*(1+20%)=$2.4

This year's dividend=2.4 *payout ratio=2.4 *20%=$0.48

Next year's earnings=$2.4*1.2=$2.88

Next year's dividend=2.88 *0.2=$ 0.58

Year 3 earnings=$2.88*1.2=$ 3.46

Year three dividend= 3.46*0.2=$0.69

year 4 earnings =$3.46*1.08=$ 3.74

Dividend from year 4 onward= 3.74 *0.5=1.87

From year 4 terminal value=1.87 /(cost of equity-growth rate)=1.87/(10%-8%)=$93.5

Share price is present value of the above dividends amnd terminal value=0.48/(1+0.1)^0+0.58/(1+0.1)^1+0.69/(1+0.1)^2+93.5/(1+0.1)^3=$ 71.83

0,0(0 оценок)