A colleague that is a regular on investing message boards recently commented that SunDoe Coffee...
70.2K
Verified Solution
Link Copied!
Question
Finance
A colleague that is a regular on investing message boards recently commented that SunDoe Coffee stock will start paying dividends in the near future because of all of the cash flow that it generates. In reviewing the stock, she made a bold forecast that SunDoe will start paying its first dividend 3 years from now in the amount of $5 per share, after which the growth rate would be a constant rate of 3%, forever. SunDoe has a debt-to-equity ratio (D/E) of 1 (equally financed with debt and equity), the annual YTM on the companys long-term bonds averages 8% and the companys tax rate is projected to be 30% in the future. If the risk-free rate is 4%, the market risk premium is 6% and SunDoe's Beta is 2.0, what should the stock sell for today based on a discounted valuation of the future dividends that your colleague projected?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.