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Calculate a firm's cash flows at a growth rate of 10 percent per year to infinity if the firm's cash flows are 42500 and you must earn 18 percent rate of return?
The question is representative of a growing perpetuity. The formula for computing the theoretical (net) present value of a perpetuity is as follows:
PV = CF / (rR - rG)
where PV = present value
CF = the annualized cash flow
rR = is the required rate of return
rG = is the growth rate of the annualized cash flows
So, if we plug numbers into the above equation:
PV = $42,500 / (18% - 10%)
= $42,500 / 8%
= $531,250
A company with the above requirements would pay $531,250 for that perpetuity derived from the cash flows.
We must assume that the cash flows can grow at 10% forever and that the hurdle rate for corporate products is 18%. In reality, 10% growth forever is rather hopeful, given that such high returns would attract competition.
What else can I help you with?
What will one do if no thing has divisibility?
Confusing be here goes. Nothing is indivisible. Special cases are: Square (or any even) root of a negative - imaginary number 0 - Will always return 0 Infinity - will always return infinity* AND DIVISIONS By 0 - Always return Infinity Infinity - Always return 0* (Infinity is a special case in itself as it does not obey normal arithmetic method - ∞+1=∞ (implies that ∞-∞=1)
An issue of common stock has just paid a dividend of 3.75 its growth rate is 8 percent what is its price if the market return is 16 percent?
$50.63
Calculate the value of a 100 debenture in perpetuity the debenture pays a coupon rate of 11 percent and the required rate of return is 9 percent per year?
122.22
Hart Enterprises recently paid a dividend It expects to have a nonconstant growth of 20 percent for 2 years followed by a constant rate of 5 percent thereafter The firms required return is 10 percent?
no
How can one calculate the rate of return over multiple years?
To calculate the rate of return over multiple years, you can use the formula for compound annual growth rate (CAGR). This formula takes into account the initial and final values of an investment over a period of time to determine the average annual return.
A stock is expected to pay a dividend of 1 at the end of the year The required rate of return is rs 11 percent and the expected constant growth rate is 5 percent?
A stock is expected to pay a dividend of $1 at the end of the year. The required rate of return is rs 11%, and the expected constant growth rate is 5%. What is the current stock price?
How can one calculate the annual rate of return over multiple years?
To calculate the annual rate of return over multiple years, you can use the formula for compound annual growth rate (CAGR). This formula takes into account the initial and final values of an investment over a specific period of time to determine the average annual return.
Dividend of 1.00 If the expected long-run growth rate for this stock is 5.4 percent and if investors' required rate of return is 13.9 percent what is the stock price?
11.04 12.40 13.76 15.00 9.42
A stock is expected to pay a dividend of 0.75 at the end of the year The required rate of return is rs equals 10.5 percent and the expected constant growth rate is g equals 6.4 percent?
A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?
What variables does the investment growth calculator at Fidelity's website use to calculate its results?
The investments growth calculator uses quite a few variables to calculate its results. These include: years investing, initial balance, annual investment, rate of return, inflation, and tax rate. Here's the website for this calculator: http://personal.fidelity.com/toolbox/growth/growth.shtml
What is the formula to calculate the annual return based on the daily return of an investment?
To calculate the annual return based on the daily return of an investment, you can use the formula: Annual Return (1 Daily Return)365 - 1.
What is the expected return for asset X if it has a beta of 1.5 the expected market return is 15 percent and the risk free rate is 5 percent?
To calculate the expected return for asset X, we can use the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate). Plugging in the values: Expected Return = 5% + 1.5 × (15% - 5%) = 5% + 1.5 × 10% = 5% + 15% = 20%. Thus, the expected return for asset X is 20%.
