Question
7. Nonconstant growth stock Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and
7. Nonconstant growth stock
Portman Industries just paid a dividend of $3.12 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portmans dividend is expected to grow at a constant rate of 3.20% per year.
The risk-free rate (rRFRF) is 4.00%, the market risk premium (RPMM) is 4.80%, and Portmans beta is 1.80.
7.1) Assuming that the market is in equilibrium, use the information just given to complete the table.
Term | Value |
---|---|
Dividends one year from now (D11) | |
Horizon value (P11) | |
Intrinsic value of Portmans stock |
7.2) Portman has 600,000 shares outstanding, and Judy Davis, an investor, holds 9,000 shares at the current price as just found. Suppose Portman is considering issuing 75,000 new shares at a price of $32.59 per share. If the new shares are sold to outside investors, by how much will Judys investment in Portman be diluted on a per-share basis?
a) $1.34 per share
b) $0.64 per share
c) $0.79 per share
d) $0.54 per share
7.3) Thus, Judys investment will be diluted, and Judy will experience a total (Profit/loss) of $_____
Please provide step by step tutorial. Thank you:) .
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