23 Jul WHAT IS THE VALUE OF TECHUS STOCK TODAY?
Stephen and Chris are also looking at issuing preferred and common stock to further expand TechUs b Show more Stephen and Chris are also looking at issuing preferred and common stock to further expand TechUs businesses. They also want to examine their existing stock value to get a picture of how much they can sell additional stock for. Help Stephen and Chris by answering the following questions. 1.)The last dividend TechU paid was $0.80. The historical growth rate in dividends has been 6% and analysts expect it to remain constant for the foreseeable future. Investors require a 14 percent rate of return. a) What is the current value or price of TechUs stock? b) What is the expected dividend yield? c) If the growth rate was 8 instead of 6 percent what would be the value of TechUs stock? d) If the growth rate was as originally stated (6 percent) but the required rate of return increased from 14 to 16 percent what would be the value of TechUs stock? e) Based on the answers for c. and d. what is the relationship between growth rates and stock price and required return and stock price? 2.) Instead of the information in question 1 what if analysts expect TechUs dividend to grow by 25 percent for the next 3 years but increased competition is expected to force their growth rate to a constant 6 percent thereafter. TechU just paid a dividend of $0.80 and investors rate of return is 14%. What is the value of TechUs stock today? 3.) TeleU the company TechU is looking at purchasing expected their dividend to grow at a rate of 35 percent for the next four years then to drop to a growth rate of 15 percent for 2 more years and then settle down to a 10 percent growth rate thereafter. TeleU just paid a dividend of $2.50. Investors required rate of return is 12 percent. What would TechU be willing to pay for TeleUs stock? 4.)Instead of common stock TechU is also looking at issuing preferred stock so Stephen Jobs can retain close ownership in the company. The preferred stock has a par value of $50 and will pay a 5% dividend per year. If the required return for investors is 8% what is the value of the preferred stock? Show less
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