Answered: Tri-coat Paints has a current market…

Tri-coat Paints has a current market value of $41 per share with earnings of $3.64. What is the present value of its growth opportunities (PVGO) if the required return is 9%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 7P

See similar textbooks

Related questions

Q: Colgate-Palmolive Company has just paid an annual dividend of $0.91. Analysts are predicting an…

A: As per the given information: Annual -dividend paid = $0.91Growth rate in earnings over the next…

Q: Bl Inc currently has earnings before interest and taxes of P3,000,000, a degree of combined leverage…

A: The degree of operating leverage can be used to estimate change in operating income with respect to…

Q: Topstone Industries is expected to pay a dividend of $2.10 per share in one year. This dividend,…

A: Cost of equity Ke=D1MP+g Ke=Cost of equity D1=Expected dividend per share at the end of the year…

Q: a. Assuming the current market price of the stock reflects its intrinsic value as computed using the…

A: EPS are the earnings than an equity investor earns for buying shares of the company and for allowing…

Q: Qantas Airways Ltd. currently has an EPS of $3.33 and an earnings growth rate of 11 per cent. If the…

A: Earnings per share in year 9 = Earnings per share in year 0 (current year) ×(1+growth rate) ^n…

Q: Soju Ltd is currently trading at $39, and recently paid an annual dividend of $4.5. If it is…

A: Last dividend (D0) = $4.5 Stock price (P0) = $39 ROE = 8% Retention ratio = 30% Growth rate (G) =…

Q: Company BestWare is expected to pay a dividend of $5.14 next year, and the company's stock is…

A: Expected dividend (D1) is $5.14. Current stock price (P0) is $59.88. WACC (r) is 12.15%.

Q: Ocean Holding Corp.'s expected year-end dividend (D1) is $4.00, and its required return is 11 %. The…

A: Given the following information: Expected year-end dividend: $4.00 Required Return: 11% Dividend…

Q: A certain company has expected next year earnings per share of $6. If the company wants to reinvest…

A: The question is based on the concept of Stock valuation

Q: A company’s estimated growth rate in dividends is 6%, its currentstock price is $40, and its…

A: Expected Return: The expected return is the minimum required rate of return which an investor…

Q: For 2020 the free cash flow to the firm (FCFF) of ABC Co. was ₱30,000. The firm has total debt of…

A: The intrinsic value per share can be calculated from free cash flow model of equity valuation

Q: Hallo Ltd. is presently enjoying relatively high growth because of a surge in the demand for its new…

A: Current price of the common stock is calculated using the dividend discount model. For that first we…

Q: Robi Axiata Limited has a book value of Tk 100 per share. Based on CAPM model, investors require an…

A: The value of the share is the present value of the dividends.

Q: What is the value of this firm?

A: Value of Levered Firm: It is estimated by the sum of the value of the unlevered firm and the…

Q: A company's current stock price is $65.40 and it is likely to pay a $2.25 dividend next year. Since…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: The stock of Louis Ltd is currently selling at R50 per share and investors expect a 30.4% rate of…

A: Dividend yield is the dividend paid during the year expressed a percentage of current share price…

Q: Compute the present value of growth opportunities if the dividend payout ratio is 35%, the return on…

A: Here, Dividend Pay-out Ratio is 35% EPS is $5 Risk Free Rate is 4.2% Company's Risk Premium 5%…

Q: The required rate of return for Ola Industries is 15.75 percent. The stock pays a current dividend…

A: This question require us to calculate the estimated price of the stock of Ola industries. We can…

Q: what is the Present Value of Growth Opportunities (PVGO) if the company reinvests 25% of its…

A: Present Value of Growth Opportunities (PVGO) is a concept that gives analysts a different approach…

Q: . HighGrowth Company has a stock price of $19. The firm will pay a dividend next year of $0.88, and…

A: Next dividend (D1) = 0.88 Current price (P0) = $19 Growth rate (G) = 4.1%

Q: need help on all

A: a.Price of the Stock = $10Expected Earnings per Share = $3Dividend Pay-out Ratio = 0.5Expected…

Q: Suppose the Pale Hose Corp. is expected to pay a dividend next year of OMR2.25 per share. Both sales…

A: Given: Suppose the Pale Hose Corp. is expected to pay a dividend next year of $2.25 per share. Both…

Q: If the Synyster Corp. has an ROE of 17 percent and a payout ratio of 25 percent, what is its…

A: Retention ratio = 1- Dividend payout ratio Retention ratio = 1- 25% Retention ratio = 75%

Q: Greshak Ltd. forecasts its long-term sustainable growth rate to be 4.0%. If the firm's required rate…

A: Given details are : Sustainable growth rate (g) = 4% = 0.04 Required rate of return (r) = 12% = 0.12…

Q: he earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the…

A: Given: Growth rate is 8% Current stock price is $28.50 per share Last dividend (D0) is $2.50 Current…

Q: Prima Corporation’s dividend per share next year is expected to be RM3.02 and the firm expects…

A: Dividend growth model is a method of valuation of stock, where the dividend paid by the company…

Q: Al-Shamukh Constructors Ltd.currently has sales of OMR 24 million a yearwith a stock level of 25…

A: Return on assets is equal to net income divided by total assets.

Q: Eastern Electric currently pays a dividend of about $1.78 per share and sells for $27 a share. If…

A: We need to compute the growth rate in this question. We can solve this question using Dividend…

Q: Tata Consumer Products just paid a dividend of 1.49 and anticipates a short term growth rate of 15%…

A: In this question, share value can be found out by using the Gordon growth model. Gordon growth model…

Q: A financial analyst estimates that the current risk-free rate for NN company is 6.25 percent, the…

A: Gordon growth model provides the current price of a share if it has a constant growth till infinity

Q: XYZ corp expects to earn $4.3 per share next year and plow back 41.86% of its earnings (i.e., it…

A: EPS next year = 4.30 Stock Price = 30 Required Return = 20%

Q: Sheridan, Inc., is expected to grow at a constant rate of 6.50 percent. If the company’s next…

A: This question is to be solved using dividend discount model of constant growth according to the…

Q: Bulldogs Inc. currently has earnings before interest and taxes of P3,000,000, a degree of combined…

A: Degree of Operating Leverage = Degree of Combined Leverage / Degree of Financial Leverage = 8 / 2 =…

Q: Company has expected earnings of $4.8 per share for next year. The firm's ROE is 16%, and its…

A: Present value of growth opportunities (PVGO) can be calculated as below:

Q: oju Ltd is currently trading at $39, and recently paid an annual dividend of $4.5. If it is expected…

A: Current stock price (P0) = $39 Recent dividend (D0) = $4.5 Retention ratio = 30% ROE = 8% Annual…

Q: The future earnings, dividends, and common stock price of Core-Tech, Inc. are expected to grow 6%…

Q: Sisters Corp expects to earn $6 per share next year. The firm's ROE is 15% and its plowback ratio is…

A: In this question we require to calculate the current stock price. According to dividend discount…

Q: Present Value of Growth Opportunities (PVGO) if the investors' required rate of return is 20%?…

A: PVGO means present value of growth opportunities. It is a method of valuation applied to growing…

Q: The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the…

A: a. The computation of the rate of return required as follows: The formulae used for the computation…

Q: XYZ corp expects to earn $4 per share next year and plow back 37.5% of its earnings (i.e., it…

A: Please find the answer to the above question below:

Q: Company BestWare is expected to pay a dividend of $5.91 next year, and the company's stock is…

A: The capital gain yield is the rate of return that is earned due to the increase in the value of the…

Question

Tri-coat Paints has a current market value of $41 per share with earnings of $3.64. What is the present value of its growth opportunities (PVGO) if the required return is 9%?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Assume that Temp Force is a constant growth company whose last dividend (D0, which was paid yesterday) was 2.00 and whose dividend is expected to grow indefinitely at a 6% rate. (1) What is the firms current estimated intrinsic stock price? (2) What is the stocks expected value 1 year from now? (3) What are the expected dividend yield, the expected capital gains yield, and the expected total return during the first year?
Sisters Corporation expects to earn $28 per share next year. The firm’s ROE is 10% and its plowback ratio is 40%. Assume the firm’s market capitalization rate is 10%. What is the present value of its growth opportunities?
Company has expected earnings of $4.8 per share for next year. The firm's ROE is 16%, and its earnings retention ratio is 55%. If the firm's market capitalization rate is 12%, what is the present value of its growth opportunities?
If the Synyster Corp. has an ROE of 17 percent and a payout ratio of 25 percent, what is its sustainable growth rate?
Arts and crafts will pay a divided of $5 per share in 1 year. It sells at $50 a share, and firms in the same industry provide an expected rate of return of 15%. What must be the expected growth rate of the company's dividends?
Bl Inc currently has earnings before interest and taxes of P3,000,000, a degree of combined leverage of 8, and a degree of financial leverage of 2. What will be the expected earnings before interest and taxes in one year if sales decrease by 20% next year?
XYZ corp expects to earn $3.9 per share next year and plow back 35.9% of its earnings (i.e., it expects to pay out a dividend of $2.5 per share, representing 64.1% of its earnings). The dividends are expected to grow at a constant sustainable growth rate and the stocks are currently priced at $30 per share. How much of the stock's $30 price is reflected in Present Value of Growth Opportunities (PVGO) if the investors' required rate of return is 20%? $_________
The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…
Arts and Crafts, Inc. will pay a dividend of $4 per share in 1 year. It sells at $50 a share, and firms in the same industry provide an expected rate of return of 16%. What must be the expected growth rate of the company’s dividends?
Percy Grainger & Company currently earns $3.00 per share and the company plans to pay 40% of its after-tax earnings as dividends, currently at $1.20 per share in dividends. It is expected to have a constant growth rate of 7% per year. If the risk free rate of return is 6%, the market risk premium is 8%, and the beta for this company is 1.0, what is the stock price?
Arts and Crafts, Inc. will pay a dividend of $2 per share in 1 year. It sells at $40 a share, and firms in the same industry provide an expected rate of return of 10%. What must be the expected growth rate of the company’s dividends? (Do not round intermediate calculations. Enter your answer as a whole percent.)