Taussig Tochnologies Corporation (TTC) has been growing at a fate of 15% per year in recent years. This same growth rate is expected to last far another 2 vears, then decline to gn=B%. a. If D0=$1.20 and rs=12%, what is TrC's stock worth today? Do net round intermediate calaulations. Round your answer to the nearest cent. 5 What is its expected dividend yieid at this time, that is, during Year 1? Do not round intermedlate calculations. Round your answer to two decimal places. What is its capital gains yields at this time, that is, during Year 1 ? Do not round intermediate calculations. Round your answer to two decimal places. b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect the price, dividend yield, and capital gains yield? 1. Due to the longer period of supernormal growth, the value of the stock will be higher for each yeac. Aithough the total retum will remain the same, the distribution between dividend yield and capical gains vield will differ for the duration of the supernormal growth period. In. Due to the langer period of supernormal growth, the value of the stock will be lower for each year. Nthough the total return will remain the same, the distribution between dividend yield and capital gains vield will differ for the duration of the supernormal growth period. III. Due to the longer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth perisd. IV. Due to the langer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capical gains yield will remain the same for the duration of the supemormal growth period. V. Due to the longer period at supernormal growth, the value of the stock will be lower for each year. The total return as well as the distribution between dividend vield and caplal gains yield will differ for the duration of the supernormal growth perisd. c. What will TTC's dividend and capital gains yields be once its period of supemormal growth ends? (Rint: These values will be the same regardless of ahether you examine the case of 2 or 5 years of supernormal growth; the calculations are very easy.) Round your answers to two decimal places. Dividend yield: Capital gains yield: d. Of what interest to investors is the changing relationship between dividend and captal gains yields bver time? 1. It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income must be paid in the current year. If. It is of no interest to investors whether they receive dividend inceme or capital gains income, sisce taxes on both types of income can be delayed until the stock is sold. IIt. Some investors need cash dividends, while others would preler growth. Aso, investors must pay taxes each year on the dividends received during the year, while taxes on the captal gain can be delayed until the gain is actually realized. TV. Some investors need cash dividends, while others would prefer growth. Alse, investors must pay taxes each year on the capital gain during the year, while taxes on the dividends can be delayed until the stock is sold. V. It 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 same rate
