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Category > Business & Finance Posted 18 May 2017 My Price 12.00

MetatrendAc€?cs stock will generate earnings of $3

MetatrendAc€?cs stock will generate earnings of $3 per share this year. The discount rate for the stock is 15%, and the rate of return on reinvested earnings also is 15%.
a.

Find both the growth rate of dividends and the price of the stock if the company reinvests the following fraction of its earnings in the firm: (i) 0%; (ii) 40%; (iii) 60%. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.)
 

Reinvestment of Earnings
     0%    40%     60%
  Growth rate of dividends % % %
  Stock price $        $        $       
 
b.

Redo part (a) now assuming that the rate of return on reinvested earnings is 20%. What is the present value of growth opportunities (PVGO) for each reinvestment rate? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answer to 2 decimal places.)
 

Reinvestment of Earnings
          0%         40%         60%
  PVGO $    $    $ 

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Status NEW Posted 18 May 2017 05:05 AM My Price 12.00

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