Elixir Drug Company is enjoying rapid growth from the introduction of its new backrub ointment. The...
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Elixir Drug Company is enjoying rapid growth from the introduction of its new backrub ointment. The dividend for a share of Elixir's stock a year from today will be K1.15. During the next four years, the dividend will grow at 15 percent per year, thereafter will drop to 12 percent for another three years due to tough competitors. After that, growth will be equal to 10 percent per year indefinitely. What is the current value of a share of stock if the required return is 15 percent? [15 marks] Geneva Electronics Co. issues a K1,000 face value, eight-year zero coupon bond. What is the yield to maturity on the bond if the bond is offered at K627? [Assume annual compounding] Elixir Drug Company is enjoying rapid growth from the introduction of its new backrub ointment. The dividend for a share of Elixir's stock a year from today will be K1.15. During the next four years, the dividend will grow at 15 percent per year, thereafter will drop to 12 percent for another three years due to tough competitors. After that, growth will be equal to 10 percent per year indefinitely. What is the current value of a share of stock if the required return is 15 percent? [15 marks] Geneva Electronics Co. issues a K1,000 face value, eight-year zero coupon bond. What is the yield to maturity on the bond if the bond is offered at K627? [Assume annual compounding]
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Answer rating: 100% (QA)
Answer To calculate the current value of a share of stock we need to determine the present value of all the future dividends We can use the dividend discount model DDM to calculate the current value G... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
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