Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

i) Bovine Cash leads a very placid existence: it always pays out all of its earnings as dividends; as a result, its earnings per share remain at $2.40 forever. Bovine Cash's required rate of return is 6%. What is Bovine Cash's fair stock price?
ii) Likewise, Run-of-the-Mill's, Inc. (RoM) predicted earnings next year are $2.40; its required rate of return is also 6%. However, RoM retains most of its earnings and keeps acquiring smaller, equally glamorous firm; the return on its investments is equal to 6%. What is Run-of-the-Mill's fair stock price?
iii) Specifically, Run-of-the-Mill always distributes 25% of its earnings, and reinvests the remaining 75% (with a return of 6% as above). What is RoM's dividend next year?
iv) How fast will RoM's dividends grow?
v) When will RoM's dividends surpass those of Bovine Cash? Hint: you may use the doubling rule to give an approximate answer.
vi) What is the PV of all future dividends? Compare to ii) and describe briefly.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945169

Have any Question? 


Related Questions in Microeconomics

Implicit and explicit costs economic problemsproblem achoco

Implicit and Explicit Costs: Economic Problems Problem A Choco Delite is a manufacturer of fine chocolates. Its monthly rental expense is $1,000,000. It also has $2 million in fixed labor costs. Its marginal costs are $. ...

Assignmentyou have been asked to assist your organizations

Assignment You have been asked to assist your organization's marketing department to better understand how consumers make economic decisions. Write a 1,050-word analysis that includes the following: • The impact the theo ...

Q1 in quantity theory of money model mv py assume that v

Q1. In quantity theory of money model, MV = PY, assume that V is constant, M is growing at 6% per year, Y is growing at 3%. a. If r = 2, what is i? b. If the Fed reduces the money growth rate by 2% points per year, what ...

Assignmentin this assignment you must break a norm this

Assignment In this assignment, you must break a norm. This breach must be done in a public forum. You will be writing an essay about your experiment, in which you must be sure to answer all of the questions listed in thi ...

1 a explain in clear language the economic inefficiency

1. a) Explain in clear language the economic inefficiency associated with adverse selection. b) The ACA (aka Obamacare) included an insurance mandate, which forces everyone to purchase insurance or face a penalty. Under ...

Fiscal policy modulewhich has a larger effect on aggregate

Fiscal Policy Module Which has a larger effect on aggregate demand: an increase in government expenditure or an equal-sized decrease in taxes? Explain your answer. To eliminate a recessionary gap, which fiscal policy sho ...

Assignmentteamworkhow does effective teamwork look how is

Assignment Teamwork How does effective teamwork look? How is teamwork displayed in your life as it relates to your current role? Why is teamwork a necessity for organizations? Does this help or hurt an organization if te ...

Assignmentanalyze the significant rules concerning the

Assignment Analyze the significant rules concerning the manner in which corporations treat the dividends that they are paying. Based on your analysis, recommend at least two changes that you would make to the rules that ...

New jersey human servicesassignment evaluation of the

NEW JERSEY HUMAN SERVICES Assignment: Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provid ...

Assignmentfirms use inputs workers machinery natural

Assignment Firms use inputs (workers, machinery, natural resources) to produce outputs (goods and services). For example: General Motors uses steel, rubber and other materials to create automobiles. A pizza restaurant tu ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro