Company Friends Inc. is expected to grow indefinitely at a constant rate of 10%. Its cost of

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

Question:

Company Friends Inc. is expected to grow indefinitely at a constant rate of 10%. Its cost of capital equals 5%. If it will pay a dividend of £5 per share next year, what is the fair price of its shares? please show your working.

Related Book For answer-question

Financial Management Theory and Practice

ISBN: 978-1305632295

15th edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

See More Books

Posted Date: May 26, 2023 12:22 AM

See More Questions

a. Describe briefly the legal rights and privileges of common stockholders. b. What is free cash flow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?...
a. Describe briefly the legal rights and privileges of common stockholders. b. Use a pie chart to illustrate the sources that comprise a hypothetical company's total value. Using another pie chart,...
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employ mentagency that supplies word...
Q3. Modulus of rupture of concrete is a measure of a) flexural tensile strength b) direct tensile strength c) compressive strength d) split tensile strength Q4. For a longitudinal reinforcing bar in...
Plaintiff, Mary Mansi, claims that eighteen checks on her account contain forgeries but were paid by the defendant bank, Sterling National Bank. These checks bore signatures which, according to the...
Find the eccentricities of the ellipses and hyperbolas. Sketch each conic section. Include the foci, vertices, and asymptotes (as appropriate) in your sketch. 3x 2 - y 2 = 3
On April 4, 2014, Athanasios Valsamis lost his appeal to get his money back from a friend to whom he had loaned $$700,000.$ As you will read, this case underscores the consequence of failing to...
Two alternative locations are under consideration (or a new plant: Jackson. Mississippi and Dayton Ohio, the Jackson location is superior In terms of costs. However, management believes that sales...
$400,000 for a new technology.The lender charges them 36% annually with monthly compounding.The agreement calls for no payment until the end of the first month of the 5th year with equal monthly...
Patriot Co. manufactures flags in two sizes, small and large. The company has total fixed costs of $240,000 per year. Additional data follow. The company is considering buying new equipment that...
A product requires four steps, A, B, C and D. The total number of operators in the process is 4 and they are assigned to the steps of the process as shown in the table below. Each worker works for...
Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts?
From the following, calculate the amount of bills accepted during the year. Bills payable as on April 01, 2005 Bills payable as on March 31, 2006 Bills payable dishonoured during the year Bills...
State the various essential features of an accounting report.
With the help of an example, briefly state the meaning of parameter queries.
What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts...
1) Which field in the IPv4 header is used to prevent apacket from traversing a network endlessly? 2) What is the purpose of the subnet mask in conjunctionwith an IP address? 3) For the subnet ID...
A business had revenues of $280,000 and operating expenses of $315,000. Did the business (a) Incur a net loss (b) Realize net income?
Explain why the APV model is suited for situations in which the capital structure is changing during the forecast period.
What are the nominal and effective costs of trade credit under the credit terms of 3 15, net 30?
a. (1) What is meant by the term "distribution policy"? How has the mix of dividend payouts and stock repurchases changed over time? (2) The terms "irrelevance," "dividend preference" (or...
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. Compute Mydecos PE ratio each year from 2019 to 2023. In which year was it the highest? b. What was Mydecos...
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. Compute Mydecos ROE each year from 2019 to 2023. b. Compute Mydecos ROA each year from 2019 to 2023. c. Which...
In early 2018, United Airlines (UAL) had a market capitalization of $$25.14$ billion, debt of $$12.73$ billion, and cash of $$5.59$ billion. United also had annual revenues of $$38.72$...

Company Friends Inc. is expected to grow indefinitely at a constant rate of 10%. Its cost of

Question:

Expert Answer:

To calculate the fair price of the shares of Friends Inc we can use the Gordon Growth Mod... View the full answer

Financial Management Theory and Practice

Students also viewed these finance questions