9. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: 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, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Do not round your intermediate calculations. Round dividends to 4 decimal places, and stock value and stock price to two decimal places. Investors expect a required rate of return of 10.24% on Portman's stock. Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dlvidend yield for Portman's stock today? 6.82% 5.63% 7,52% 7.04% Now let's apply the results of your calculations to the following situation: Portman has 1,200,000 shares outstanding, and Judy Davis, an investor, holds 18,000 shares at the current price (computed above). Suppose Portman is considering issuing 150,000 new shares at a price of $43.70 per share. If the new shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on a per-share basis? $1.06 per share $0.73 per share $1.81 per share $0.86 per share Thus, Judy's investment will be diluted, and Judy will experience a total 8. Constant growth stocks Urban Drapers Inci, a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $3.84 per share every year to its shareholders. In its most recent annual report, the company Informed investors that it expects to maintain its constant dividend in the foreseeable future and that dividends are not expected to increase. If you are an investor who requires a.34.50\% rate of return and you expect dividends to remain constant forever, then your expected valuation for Urban Drapers stock today is per share. Urban Drapers has a sister company named Super Carpeting Ine. ( 5Cl). 5Cl just paid a dividend (D0 ) of $2.88 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.00% per year. If the required return ( kee) on 5Cl 's stock is 15.00%, then the expected stock price of 5Cl 's shares is per share. Which of the following statements is true about the constant growth model? When using a constant growth model to analyze a stock, if an increase in the growth rate occurs while the required return remains the same, this will lead to an increased value of the stock. When using a constant growth model to analyze a stock, it an increase in the growth rate occurs while the required return remains the same, this will lead to a decreased value of the stock. Use the constant growth model to caiculate the appropriate values to compiete the following statements about Super Carpeting inc:: - If SCi's stock is in equilibrium (that is, where the stockprice is equal to the market value of the stock), the current expected dividend yield on the stock will be Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc:: - If Scly stock is in equilbrium (that is, where the Stockprice is equal to the market value of the stock), the current expected dividend yield on the stock will be - Sct's expected stock price one year from today will be per share. 9. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: 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, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Do not round your intermediate calculations. Round dividends to 4 decimal places, and stock value and stock price to two decimal places. Investors expect a required rate of return of 10.24% on Portman's stock. Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dlvidend yield for Portman's stock today? 6.82% 5.63% 7,52% 7.04% Now let's apply the results of your calculations to the following situation: Portman has 1,200,000 shares outstanding, and Judy Davis, an investor, holds 18,000 shares at the current price (computed above). Suppose Portman is considering issuing 150,000 new shares at a price of $43.70 per share. If the new shares are sold to outside investors, by how much will Judy's investment in Portman Industries be diluted on a per-share basis? $1.06 per share $0.73 per share $1.81 per share $0.86 per share Thus, Judy's investment will be diluted, and Judy will experience a total 8. Constant growth stocks Urban Drapers Inci, a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $3.84 per share every year to its shareholders. In its most recent annual report, the company Informed investors that it expects to maintain its constant dividend in the foreseeable future and that dividends are not expected to increase. If you are an investor who requires a.34.50\% rate of return and you expect dividends to remain constant forever, then your expected valuation for Urban Drapers stock today is per share. Urban Drapers has a sister company named Super Carpeting Ine. ( 5Cl). 5Cl just paid a dividend (D0 ) of $2.88 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.00% per year. If the required return ( kee) on 5Cl 's stock is 15.00%, then the expected stock price of 5Cl 's shares is per share. Which of the following statements is true about the constant growth model? When using a constant growth model to analyze a stock, if an increase in the growth rate occurs while the required return remains the same, this will lead to an increased value of the stock. When using a constant growth model to analyze a stock, it an increase in the growth rate occurs while the required return remains the same, this will lead to a decreased value of the stock. Use the constant growth model to caiculate the appropriate values to compiete the following statements about Super Carpeting inc:: - If SCi's stock is in equilibrium (that is, where the stockprice is equal to the market value of the stock), the current expected dividend yield on the stock will be Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc:: - If Scly stock is in equilbrium (that is, where the Stockprice is equal to the market value of the stock), the current expected dividend yield on the stock will be - Sct's expected stock price one year from today will be per share