Question
please help with these 3 questions, unsure on how to solve them Question 1: Computech Corporation is expanding rapidly and currently needs to retain all
please help with these 3 questions, unsure on how to solve them
Question 1:
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidlyat a rate of 21% per yearduring Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 12%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.
$ ____
Question 2:
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) and has a beta of 0.9. The risk-free rate is 3.8%, and the market risk premium is 6%. Justus currently sells for $27.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P3?) Do not round intermediate calculations. Round your answer to the nearest cent.
$_____
Question 3:
A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it should continue to grow at a constant rate of 6% a year. If its required return is 14%, what is the stock's expected price 5 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.
$ ______
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