A private startup company has just gone public. It is not expected to pay any dividends...
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A private startup company has just gone public. It is not expected to pay any dividends for the first 2 years. It is then expected to pay dividends of $13 per share with 10% growth for 4 years. After those four years, it is expected to have a dividend growth rate of 2.5% forever. If the required rate of return is 7%, what is the value of the stock? A public company that is a competitor to the private startup above is expected to issue dividends of $9 next year. At what growth rate would the public company's stock be identical to the stock of the private company above? The required rate of return for the public company is 8% A private startup company has just gone public. It is not expected to pay any dividends for the first 2 years. It is then expected to pay dividends of $13 per share with 10% growth for 4 years. After those four years, it is expected to have a dividend growth rate of 2.5% forever. If the required rate of return is 7%, what is the value of the stock? A public company that is a competitor to the private startup above is expected to issue dividends of $9 next year. At what growth rate would the public company's stock be identical to the stock of the private company above? The required rate of return for the public company is 8%
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Answer rating: 100% (QA)
Valuation of the Private Startup We can use the Gordon Growth Model GGM to value the private startup Step 1 Calculate the terminal value TV Year 6 onwards Constant growth rate g 25 Dividend in year 5 ... View the full answer
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
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