Q Search this course Ch 07: Assignment - Corporate Valuation and Stock Valuation - Part 1 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. (Note: Do not round your intermediate calculations.) Value Term Dividends one year from now (D) Horizon value (6) (Note: Rounded to four decimal places) (Note: Rounded to two decimal places) Intrinsic value of Portman's stock (Note: Rounded to two decimal places) The risk-free rate (TRF) is 4.00%, the market risk premium (RPM) is 4.80%, and Portman's beta is 1.30. 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? 6.82% 7.52% 5.63% 7.04% Search this course Ch 07: Assignment - Corporate Valuation and Stock Valuation - Part 1 What is the expected dividend yield for Portman's stock today? 6.82% 7.52% 5.63% 57.04% 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? $1.81 per share $0.73 per share $0.86 per share $1.06 per share of Thus, Judy's investment will be diluted, and Judy will experience a total Grade It Now Save & Continue Continue without saving companies evolve, certain factors can drive sudden growth. This may le pected growth rate to increase or decrease, thereby affecting the valuati nonconstant, growth model for the valuation of the company's stock. onsider the case of Portman Industries: Fortman Industries just paid a dividend of $3.12 per share. The company - o grow by 16.00% over the next year. After the next year, though, Portman Note: Do not round your intermediate calculations.) Value (Note: Rounded to le (Note: Rounded to tu $3.7350 Term Dividends one year from now (D) Horizon value (fi) Intrinsic value of Portman's stock $3.8545 The risk-free rate (TR) is 4.00%, the m $4.3326 pernum (RPM) is 4,80%, a Assuming that the market is in equilibriu $3,6192 Information Just given to ce (Note: Rounded to two What is the expected dividend yield for Portman's stock today? 6.82% 24 MacBook go F3 888 74 FO F5 F2 > A @ # 3 $ 4 % 5 2 N 6 W E R T stant, growth model for the valuation of the company's stock. the case of Portman Industries: Industries just paid a dividend of $3.12 per share. The company by 16.00% over the next year. After the next year, though, Portma Do not round your intermediate calculations.) Value n Bends one year from now (D) zon value (1) insic value of Portman's stock (Note: Rounded to (Note: Rounded to (Note: Rounded to tu $51.41 risk-free rate (TRF) is 4.00%, the m$36.47 remium (RPM) is 4.80% uming that the market is in equilibriu $116.72 Information just given to $53.05 tock today? Sat is the expected dividend yield for 6.82% NO 9 MacBoo F5 30 F3 F4 F2