For Southwest Airlines, Calculate and chart the company's current stock price under various scenarios. Zero Dividend Growth
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Question:
For Southwest Airlines,
Calculate and chart the company's current stock price under various scenarios.
- Zero Dividend Growth
- Constant Dividend Growth (dividends are expected to grow at 3% per year)
- Free Cash Flows
- Assume revenues are expected to grow at 10 percent per year for two years, then 8 percent per year for the following two years, then at 6 percent per year after that.
- Assume all expenses are proportional to revenues based on the most recent fiscal year.
- Assume analysts are expecting dividends to grow 5% per year, indefinitely.
- Assume standard corporate tax rate of 35%.
If your company does not have a current dividend, assume they will be paying a dividend of 1% of their current stock price next year. Stock price and dividend information can be referenced in the company's most recent 10-K filing (Item 5, Part 2).
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
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