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Argosy University/ Phoniex University/
Nov-2005 - Oct-2011

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Phoniex University
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Category > Management Posted 05 Jan 2018 My Price 6.00

DesignLogic

4. (20 Points) DesignLogic is a fast growing company that distributes 20% of its earnings as dividends. An institutional investor plans to hold the company stock for 10 years. The investor seeks 15% rate of return, and expects the stock to be traded at 30 times earnings at the end of 10 years. Current earning is $4/share (E0=4). Earning with grow at a rate of 21% during the first year, and decline by 3% every year during the following 4 years reaching 9% in year 5. The growth rate will continue to be 9% for the remaining 5 years.

a. Use the combined earnings and dividend model to determine the current value of the stock.

b. How much is the growth rate after year 10?

Time	G	Earnings	Dividend	Future Price	D + FP	PV
0		$4.00		N/A
1	0.21
2
3
4
5	0.09
6
7
8
9
10
Stock Value

a. Use the combined earnings and dividend model to determine the current value of the stock.

b. How much is the growth rate after year 10?

Time	G	Earnings	Dividend	Future Price	D + FP	PV
0		$4.00		N/A
1	0.21
2
3
4
5	0.09
6
7
8
9
10
Stock Value

Answers

Maurice Tutor

(5)

Status NEW Posted 05 Jan 2018 01:01 PM My Price 6.00

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