A. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it
Question:
A. Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly-at a rate of 34% per year-during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 13%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.
B.Holt Enterprises recently paid a dividend, D0, of $3.25. It expects to have nonconstant growth of 14% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 19%.
- How far away is the horizon date?
a. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
b.The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
c.The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
d.The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.
e.The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.
2.What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent.
3.What is the firm's intrinsic value today, ? Do not round intermediate calculations. Round your answer to the nearest cent.