58 714
Assignments Done
Successfully Done
In March 2018
Your physics homework can be a real challenge, and the due date can be really close — feel free to use our assistance and get the desired result.
Be sure that math assignments completed by our experts will be error-free and done according to your instructions specified in the submitted order form.
Our experts will gladly share their knowledge and help you with programming homework. Keep up with the world’s newest programming trends.

Answer on Finance Question for TARA

Question #41649
Suppose that sales and profits of Oly Enterprises are growing at a rate of 30% per year. At the end of 4 years (t4) the growth rate will drop to a steady 5%. Oly recently paid a dividend of $1 per share. If the required return is 20%, what is the value of one Oly share today (t0)?

(Assume dividends grow at the same rate as earnings after year 4.)
Expert's answer
The formula for the present value of a stock with constant growth is the estimated dividends to be paid divided by the difference between the required rate of return and the growth rate.

The present value of a stock with constant growth is one of the formulas used in the dividend discount model, specifically relating to stocks that the theory assumes will grow perpetually. The dividend discount model is one method used for valuing stocks based on the present value of future cash flows, or earnings.
P4 = 1/(0.20-0.05) = P(t0) = 1*(1.3/1.2)^4 + (6.67+1)/1.2 = $7.77

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


No comments. Be first!

Leave a comment

Ask Your question