Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Teffla Electric Lawn Mowers is a young, but growing company. Analysts expect it to reach maturity during the year 2028. One analyst forecasts the company
Teffla Electric Lawn Mowers is a young, but growing company. Analysts expect it to reach maturity during the year 2028. One analyst forecasts the company will start paying annual dividends at the end of 2028 for the first time. She expects a dividend of $3.50 per share on December 31, 2028, and dividends to grow at 4% per year from then on. The appropriate discount rate for Teffla shares is 11% and it has 150 million shares outstanding. a) On January 1, 2028, what is the fair value of Teffla shares based on the analyst's prediction? b) What is the fair value of Teffla shares as of January 1, 2023? The same analyst also predicts that in 2024, the company will sell their battery technology division for $1.05 billion dollars. The proceeds from the sale will be distributed as a one-time bonus dividend on December 31, 2024. c) What is you answer to question b) now
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started