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Use following information for the questions 610 ( 9 points). Splash Corp is a US international firm that makes snow and water equipment, such as
Use following information for the questions 610 ( 9 points). Splash Corp is a US international firm that makes snow and water equipment, such as snow twe the the Water Park rafts. Splash has a current dividend of $2.15. Splash has an expected growth rate in dividends of 5.5% shareholders require 16.3% return. 6. Compute the stock price for Splash using the Gordon Growth Model. GGM: Price = Dividend 1( Required Return Growth Rate ) 7. Explain the promise made to the Splash shareholders by the Splash executives. 8. Discuss the two types of risk to which Splash shareholders are exposed and provide one example of each. 9. Suppose that Splash uncovers a project that has a substantial positive net present value and decides to dramatically increase the dividend for a few years. Describe how a financial analyst might determine the price of Splash under those circumstances. 10. The formula to compute the growth rate in dividends is: Dividend Growth Rate = Return on Equity Retention Ratio Using this formula, explain the relationship between profitability, dividends, and stock price
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