Question
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D1) at the end of the current year will be $1.60. The growth rate (g) is 12 percent and the discount rate (Ke) is 15 percent. |
a. | What should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) |
Price of the stock | $ |
b. | If there is a 5 percent total underwriting spread on the stock, how much will the issuing corporation receive? (Do not round intermediate calculations and round your answer to 2 decimal places.) |
Net price to the corporation | $ |
c. | If the issuing corporation requires a net price of $51.83 (proceeds to the corporation) and there is a 5 percent underwriting spread, what should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) |
Necessary public price | $ |
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