Tausig Technologies Corporation (TTC) has been growing at a rate of 20 percent per year in recent
Question:
Tausig Technologies Corporation (TTC) has been growing at a rate of 20 percent per year in recent years. This same growth rate is expected to last for another 2 years.
a. If D0 = $1.60, rs = 10%, and gn = 6%, what is TTC’s stock worth today? What is its expected dividend yield and capital gains yield at this time?
b. Now assume that TTC’s period of supernormal growth is to last another 5 years rather than 2 years. How would this affect its price, dividend yield, and capital gains yield? Answer in words only.
c. What will be TTC’s dividend yield and capital gains yield once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth; the calculations are very easy.)
d. Of what interest to investors is the changing relationship between dividend yield and capital gains yield over time?
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt