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

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?

Step by Step Solution

★★★★★

3.46 Rating (166 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Part 2 Expected dividend yield D 1 P 0 1925411 355 Capital gains yield First find P 1 which equals the sum of the present values of D 2 and P 2 discou... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

9-B-F-F-M (133).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Ockham Technologies fundraising decision Professor Tripsas Ockham technologies is considering three options for raising money. They ideally want to raise $2M now and raise more money later. The...

Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to gn = 6%. a. If D0 =...

Assume an all-equity firm has been growing at a 10 percent annual rate and is expected to continue to do so for one more year, before a year of 5% growth. After that growth is expected to slow to a...

Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $5 per share. a. If the market expects a 10% rate of...

Taussig 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 Dp = $1.60, k = 10%, and...

8-23 Taussig Technologies Corporation (TTC) has been growing at a rate of 20 percent per year in Supernormal growth stock recent years. This same growth rate is expected to last for another 2 years....

Tanner 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 two years. a. If D0 = $1.60, rs = 10%,...

Q.1 (10 marks) a. Taussig 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, then to...

Please solve without using excel Q.1 (10 marks) a. Taussig 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...

please answer b,c,d. they are 1 question with a few parts. Excel Activity: Nonconstant Growth and Corporate Valuation Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year...

chapter 9 excel Excel Activity: Nonconstant Growth and Corporate Valuation Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is...

DNA precursor imbalances are mutagenic. For example, if dGTP accumulates, it can compete with dATP for incorporation opposite dTMP in the template, leading to a transition mutation. Investigators...

There are many resources available on the Web to assist people in time management. Some of these resources are designed specifically for college students. Instructions Go to...

True or False? If False, why? ( a ) A venture's financial objective is to survive. ( b ) Fads are not considered to be a megatrend providing entrepreneurial opportunities.

Suppose that your mass is 76.4 ke. and you are standing on a scale fastened to the floor of an elevator. The scate measures force and is calibrated in newtons. What does the scale read when the...

A 4.2 kg particle starts from rest at x = 0 and moves under the influence of a single force F= 20 + 10x- 3x?, where F, is in newtons and x is in meters. Calculate the work done by the force as the...

A car is traveling at 27.1 m/s along a horizontal road. The coefficients of friction between the road and the tires are He = 0.71 and 4k = 0.35. Calculate the distance the car travel before stopping...

A 60-kg block slides along the top of a 10O kg block. The 60-kg block has an acceleration of 7 m/s2 when a horizontal force Fof 777 N is applied, as in the Figure. There is no friction between the...

7. Hexadecimal Sector Display Using the Sector Display program (Section 15.4.1) as a starting point, add code that lets the user press F2 to display the current sector in hexadecimal, with 24 bytes...

Due to a recession, expected inflation this year is only 3%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3%. Assume that the expectations...

A companys 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.3%. The average inflation premium is 2.5%;...

An unlevered firm has a value of $600 million. An otherwise identical but levered firm has $240 million in debt. Under the Miller model, what is the value of the levered firm if the corporate tax...

Air Tampa has just been incorporated, and its hoard of directors is currently grappling with the question of optimal capital structure. The company plans to offer commuter air services between Tampa...

Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5% bonds outstanding. Assume that (1) there arc no corporate or personal taxes, (2) all of the...

Nominal and real rates and yield curves A firm wishing to evaluate interest rate behavior has gathered data on the nominal rate of interest and on inflationary expectations for five U.S. Treasury...