1. KURO is expected to have dividends grow at a rate of 9% for the next three...
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1. KURO is expected to have dividends grow at a rate of 9% for the next three years. Starting from the fourth year, dividends will settle down to a more sustainable growth rate of 5% which is expected to last “forever.” If the company just paid a dividend of $5.00 and its level of risk requires a cost of equity of 10%, what is the intrinsic value of its stock?
2. KURO has maintained a stable debt-equity ratio of 0.6 and a cost of debt of 6%. It’s marginal tax rate is 15%. Compute its WACC.
3. KURO initially had a beta of 0.5. The management believes that it can further raise its debt-equity ratio to 0.8. What is KURO’s new beta after this leverage change?
Related Book For
Entrepreneurial Finance
ISBN: 978-0538478151
4th edition
Authors: J . chris leach, Ronald w. melicher
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