Metallica Bearings, Inc., is a young start-up company. No dividends will be paid
ID: 2712907 • Letter: M
Question
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.00 per share 9 years from today and will increase the dividend by 5.75 percent per year thereafter. The required return on the stock is 13.75 percent.
What is the price of the stock 8 years from today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.00 per share 9 years from today and will increase the dividend by 5.75 percent per year thereafter. The required return on the stock is 13.75 percent.
Explanation / Answer
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid