Common Stock Value Variable Growth Personal Finance Problem Home Place Hotels Inc Is Entering Into A 3 Year Remodelin 1 (80.66 KiB) Viewed 62 times
Common stock value-Variable growth Personal Finance Problem Home Place Hotels, Inc., is entering into a 3-year remodeling and expansion project. The construction will have a limiting effect on earnings during that time, but when it is complete, it should allow the company to enjoy much improved growth in earnings and dividends. Last year, the company paid a dividend of $3.70. It expects zero growth in the next year. In years 2 and 3, 4% growth is expected, and in year 4, 19% growth. In year 5 and thereafter, growth should be a constant 11% per year. What is the maximum price per share that an investor who requires a return of 15% should pay for Home Place Hotels common stock? The maximum price per share that an investor who requires a return of 15% should pay for Home Place Hotels common stock is $ (Round to the nearest cent.)
Common stock value-Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $4.09 per share and paid cash dividends of $2.39 per share (Do = $2.39). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 9% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 12% on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips is $ (Round to the nearest cent.)
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