Burklin, Inc., has earnings of $18.5 million and is projected to grow at a constant rate...

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Burklin, Inc., has earnings of $18.5 million and is projected togrow at a constant rate of 5 percent forever because of thebenefits gained from the learning curve. Currently, all earningsare paid out as dividends. The company plans to launch a newproject two years from now that would be completely internallyfunded and require 25 percent of the earnings that year. Theproject would start generating revenues one year after the launchof the project and the earnings from the new project in any yearare estimated to be constant at $7 million. The company has 8.3million shares of stock outstanding.

Estimate the value of the stock. The discount rate is 10percent.

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Ans Value of Stock 484 Dividend for first 2 years Net earnings Dividend per share Dividend no of shares 185 83 2229 Dividend in year 1 2229 15 234 Dividend in See Answer

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Burklin, Inc., has earnings of $18.5 million and is projected togrow at a constant rate of 5 percent forever because of thebenefits gained from the learning curve. Currently, all earningsare paid out as dividends. The company plans to launch a newproject two years from now that would be completely internallyfunded and require 25 percent of the earnings that year. Theproject would start generating revenues one year after the launchof the project and the earnings from the new project in any yearare estimated to be constant at $7 million. The company has 8.3million shares of stock outstanding. Estimate the value of the stock. The discount rate is 10percent.