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Assume that it is now January 1,2022 . Wayne-Martin Electric Inc. (WME) has developed a solar panel capable of generating 200% more electricity than any
Assume that it is now January 1,2022 . Wayne-Martin Electric Inc. (WME) has developed a solar panel capable of generating 200% more electricity than any other solar panel currently on the market. As a result, WME is expected to experience a 16% annual growth rate for the next 5 years. Other firms will have developed comparable technology by the end of 5 years, and WME's growth rate will slow to 4% per year indefinitely. Stockholders require a return of 11% on WME's stock. The most recent annual dividend (D0), which was paid yesterday, was $2.00 per share. a. Calculate WME's expected dividends for 2022, 2023, 2024, 2025, and 2026. Do not round intermediate calculations. Round your answers to the nearest cent. D2022=$ D2023=$ D2024=$ D2025=$ D2026=$ b. Calculate the value of the stock today, P0. Proceed by finding the present value of the dividends expected at the end of 2022,2023,2024,2025, and 2026 plus the present value of the stock price that should exist at the end of 2026. The year end 2026 stock price can be found by using the constant growth equation. Notice that to find the December 31,2026 , price, you must use the dividend expected in 2027, which is 4% greater than the 2026 dividend. Do not round intermediate calculations. Round your answer to the nearest cent. c. Calculate the expected dividend yield (D1/P0), capital gains yield, and total return (dividend yield plus capital gains yield) expected for 2022. (Assume that P0=P0 and recognize that the capital gains yield is equal to the total return minus the dividend yield.) Do not round intermediate calculations. Round your answers to two decimal places. D1/P0= Capital gains yield = Expected total return = % Then calculate these same three yields for 2027. Do not round intermediate calculations. Round your answers to two decimal places. D6/P5= Capital gains yield = Expected total return =$
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