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How would this affect its price, dividend, yield, and capital gains yield? Find the price today. D₂ Year Dividend "V of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $59.5547 $70.0197 $1.60 10.0% 20% $1.60 D $1.920 2.74% Short-rung; for Years 1-5 only. Long-run g; for Year 6 and all following years. $1.92 art 2. Finding the expected dividend yield. vidend yield- ividend yield = ividend yield 1 $2.30 105.5048 15 years rather than yea P₁ $70.020 3 $2,76 $3.32 Terminal value $3,98 4.2202 4.0% $4.22

How would this affect its price, dividend, yield, and capital gains yield? Find the price today. D₂ Year Dividend "V of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $59.5547 $70.0197 $1.60 10.0% 20% $1.60 D $1.920 2.74% Short-rung; for Years 1-5 only. Long-run g; for Year 6 and all following years. $1.92 art 2. Finding the expected dividend yield. vidend yield- ividend yield = ividend yield 1 $2.30 105.5048 15 years rather than yea P₁ $70.020 3 $2,76 $3.32 Terminal value $3,98 4.2202 4.0% $4.22

Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 24P: Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12%...
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b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect its price, dividend, yield, and capital gains yield? 1. Find the price today. D₂ 2 2 Year Dividend PV of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $1.60 10.0% $59.5547+ $70.0197 - P Dividend yield- Dividend yield- Dividend yield $1.60 Part 2. Finding the expected dividend yield. Dividend yield- Dividend yield- Dividend yield- D₁ $1.920 2.74% Short-run g; for Years 1-5 only. Long-run g; for Year 6 and all following years. 10.0% 7.26% $1.92 Part 3. Finding the expected capital gains yield. Cap. Gain yield-Expected return Cap. Gain yield Cap. Gain yield- Cap. Gain yield Expected return Cap. Gain yield Cap. Gain yield 1 $2.30 " 1 P₁ $70.020 105.5048 Terminal value = Ps= Dividend yield 2.74% 3 $2.76 P. 4 $3.32 Dividend yield 5 $3.98 4.2202 c. What will be TTC's dividend yield and capital gains yield once its period of supernormal growth ends? We used the 5 year supernormal growth scenario for this calculat but ultimately it does not matter which example you use, as they both yield the same result. Da+ 6% to $4.22 -F.-B Upon reflection, we see that these calculations were unnecessary because the constant growth assumption holds that the long-term growth rate is the dividend growth rate and the capital gains yield, hence we could have simply subtracted the long-run growth rate from the required return to find the dividend yield.
Transcribed Image Text:b. Now assume that TTC's period of supernormal growth is to last for 5 years rather than 2 years. How would this affect its price, dividend, yield, and capital gains yield? 1. Find the price today. D₂ 2 2 Year Dividend PV of dividends $1.7455 $1.9041 $2.0772 $2.2661 $2.4721 $1.60 10.0% $59.5547+ $70.0197 - P Dividend yield- Dividend yield- Dividend yield $1.60 Part 2. Finding the expected dividend yield. Dividend yield- Dividend yield- Dividend yield- D₁ $1.920 2.74% Short-run g; for Years 1-5 only. Long-run g; for Year 6 and all following years. 10.0% 7.26% $1.92 Part 3. Finding the expected capital gains yield. Cap. Gain yield-Expected return Cap. Gain yield Cap. Gain yield- Cap. Gain yield Expected return Cap. Gain yield Cap. Gain yield 1 $2.30 " 1 P₁ $70.020 105.5048 Terminal value = Ps= Dividend yield 2.74% 3 $2.76 P. 4 $3.32 Dividend yield 5 $3.98 4.2202 c. What will be TTC's dividend yield and capital gains yield once its period of supernormal growth ends? We used the 5 year supernormal growth scenario for this calculat but ultimately it does not matter which example you use, as they both yield the same result. Da+ 6% to $4.22 -F.-B Upon reflection, we see that these calculations were unnecessary because the constant growth assumption holds that the long-term growth rate is the dividend growth rate and the capital gains yield, hence we could have simply subtracted the long-run growth rate from the required return to find the dividend yield.
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