Answered

Explore Westonci.ca, the top Q&A platform where your questions are answered by professionals and enthusiasts alike. Our platform provides a seamless experience for finding precise answers from a network of experienced professionals. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields.

Changes in Growth and Stock Valuation Consider a firm that had been priced using a 10 percent growth rate and a 13 percent required rate. The firm recently paid a $2.40 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 11 percent rate. How much should the stock price change (in dollars and percentage)

Sagot :

abiolataiwo2015

Answer:

Change in dollars $45.20

Change in percentage 51.36%

Explanation:

Calculation to determine How much should the stock price change (in dollars and percentage)

First step is to calculate the Price before change

Price before change= ($2.40*1.10)/(.13 - .10)

Price before change = $2.64/0.03

Price before change = $88

Second step is to calculate Price after change

Price after change=($2.40*1.11)/(.13 - .11)

Price after change=$2.664/0.02

Price after change = $133.2

Now let calculate the in dollars and percentage

Change in dollars=$133.2 -$88

Change in dollars=$45.20

Change in percentage=$45.20/$88

Change in percentage=0.5136*100

Change in percentage=51.36%

Therefore How much should the stock price change (in dollars and percentage) will be :

Change in dollars $45.20

Change in percentage 51.36%

Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Thank you for choosing Westonci.ca as your information source. We look forward to your next visit.