The weighted average cost of capital for the firm is 20% and the do not have any

Fantastic news! We've Found the answer you've been seeking!

Question:

The weighted average cost of capital for the firm is 20% and the do not have any liabilities on their balance sheet.

The stock price is $ 99 per share RIGHT NOW .

Also we know their Earnings per Share will be $ 8 per share in the NEXT YEAR and will remain constant/ fixed.

Also from their earnings the company REINVESTS 29% of the Earnings to grow operations. Whenever they do that (WHICH IS EVERY YEAR) they ensure that $ 1 of their investment in the period of investment brings to the firm Cash Flows of $ Z in the NEXT YEAR AND EVERY YEAR AFTER THAT TO INFINITY. Consequently, the company's DIVIDENDS grow at the fixed growth rate %g at INFINITY.

For the Present Value of Growth Opportunities, the present value of this year's investments will not be inserted in the Present Value of Growth Opportunities.

Using the above information answer the following questions in detailed steps please:

Question 1:

In the year after the current one, what will be the dividend per share that the company expects to pay out to its investors ?

Please also calculate the g% growth rate for the dividends in the year after the current one ?

Question 2:

The company's REINVESTMENTS of 29% of the Earnings to grow operations, will generate how much Cash Flows denoted as $ Z in the NEXT YEAR AND EVERY YEAR AFTER THAT TO INFINITY?

Question 3:

Calculate the PORTION of the present market value of the company which captures the Present Value of Growth Opportunities.