Assume thatit is now January 1, 2022. Wayne-Martin Electhic Inc. (WME) has developed a solar panel capable of generating 2006 more clectricity than any other solar panel curtently on the market. As a result, WME is expected to expenence a 14 . annual growth rate for the next 5 years. Other firms will have developed comparable technology 0 the end of 5 years, and WMe's growth rate will slow to 'SW per year indefinitely. Stockholders require a return of 12% on WME 's stock. The most recent anniear dividend (Oo). which was pald yesterday, was $1.50 per share. a. Calculate WME's expected dividends for 2022, 2023, 2024, 2025, and 2026. Do not round intermediate calculations: Rround your answers to the nearest cent D2022=5D2022=5D2024=5D2045=5D2020=5 b. Calculate the value of the stock today. P. Proceed by finding the present value of the dividends espected at the end of 2022, 2023, 2024, 2025, and 2026 plus the gresent 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 equatian. Notice that to find the Decimber 31, 2026, price, you must use the dividend expected in 2027, which is 5% greater than the 2026 dividend. Do not round intermediate calculations. Round vour answer to the nearest cent. 1. c. Calculate the expected dividend yield (O1/ Po 0 ), capital gains yield, and total retum (dividend yield plus capitat gains yield) expected for 20zz, (Assime that P^0. =Pg and recognue that twe capital gains yield is equal to the total return minus the dividend yield.) Do not round intermediate calculations. Round your answers to fwo decimal places. D1/P1= Capital gains vield = Expected tistal fetum = Then calculate these same three yelas for 2027, Do not round intermediate calculations, Rocand your answers to two decimat piaces. D2/P3= Copital gains yield = Expected total return = Then calcalate these same three yields for 2027. Do hot round intermediate calculations. Round your andwers to two decimal places. Dups = Copitat gains yield o Expected total return = d. How might an invettor's tax situation affect his or her decision to purchase stocks of companies in the eariy stages of their lives, when they are growing rapidiy, wersus stoclas of oldec, more mature firms? When does WMEs stock become "mature" for purposes of this question? - I. It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income can be defared unta the stock is sold. The firmis stock is "mature" at the end of 2026 . 11. People in highrincome tax brackets will be more inclined to purchase "growth" stocks to take the capital gains and thus deley the payment of taxes unti a later date. The firm's stock is "mature" at the end of 2026 . III. Some investors need cash dividends, whlle others would prefer growth. Inveitors must pay taxes each year on the capital gain during the year, while taxes on the dividends can be delayed until the stock is soid. The firm's stock is "mature" at the end of 2026. TV. ft is of no interest to investors whether they receive dividend income or capital gains income, since both types of income are always taxed at the sime rate. The firmy. stock is "mature" at the end of 2026 . V.t is of no interest to investors whether they recelve dividend income of capital gains income, since taxes on both types of income must be paid in the cuerent yeac. The firm's steck is "mature" at the end of 2026 . e. Suppose your boss tells you she believes that WME's anhusl growth rate will be only 12% during the neat 5 years and that the firmis long-run growth rate wal be anily 4 the. Without doing any calculations, what general effect would these grawth rate changes have on the price of wME's stock? 1. Snce the firmis supernormal and normal growth rates are lower, the divisends and, hence, the present value of the stock price wiil be lower. The tocal return from the stock will remain the same, but the dividend yeld will be smaller and the capital gains yield will be larper than they were with the original growth rotes. 11. Since the firm's supernormal and normal growth rates are ioner, the dividonds and, fience, the present value of the stock prico will be fower. Toe tocal return from the e. Suppose your boss tel's you she believes that WME's annwal growth rate will be only 12% during the next 5 years and that the firm's lang-run growth rate will bot only 4 th Whout doing any calculations, what general effect would these growth rate changes hawe on the price of WMEzs stock? 1. Since the firmis supernormal and nomal growth rates are lawec, the divdends and, hence, the present value of the stock price. will be lower. The total return from the stock will remain the same, but the dividend yield will be smaller and the capital gains yieid will be larger than they were with the original growth rates. It. Since the firm's supernormal and normal growth rates are lower, the dividends and, hense, the present value of the stock price will be lower. The total refurn from the stock will decline, and both the dividend vield and the capital gains yiedd will be smaller than they were with the original growth rates. III. Since the firm's supemormal and normal growth rates are lowec, the dividends and, hence, the prescat value of the stock price will be lower, The total return from the stock will increase, and both the dividend yeld and the capilal gains yield will be greater than they were with the oniginal growth rates. IV. Since the firm's supernormal and normal growth rates are lowec, the dividends and, hence, the present value of the stock price wis be lower. The total return froin the tock will decline, and the dividend yleid and the capital gains yield will be the same. V. Since the firm's supernormal and normal growth rates are lowec, the dividends and, hence, the present value of the stock price will be lower. The fotal return from the stock will remain the same, but the dividend yield will be larger and tho capital gains yield wili be smaller than they were with the original growth rates. 6. Suppose yout boss also telis you that she regards wME as being quite rishy and that she believes the required rate of return should be 16%, not 12 . Without doing any calculations, determine how the higher required rate of refurn would affect the price of the stock, the capital gains yield, and the dividend yield Agaif, assume that the long-: run growth rate is 4W. 1. As the required retum increases, the price of the stock goes up, and both the capital gains and dividend yields increase initially. 11. As the required retum increates, the pnice of the stock goes up, and both the capital gains and dividend yields decrease initially. 111. As the required retum increases, the price of the stock temains the same since both the capital gains and dividend vields remain constant. TV. As the required retum increoses, the price of the stock goes down, but both the capital gains and dividend yeids increase initialy. V. As the requied retum increases, the price of the stock goes down, but both the capital gains and dividend yields decrease initilly