Agarwal Technologies was founded 10 years ago. It has been profitable forthe last 5 years, but it has needed all of its earnings to support growth andthus has never paid a dividend. Management has indicated that it plans topay a PO.25 dividend 3 years from today, then to increase it at a relativelyrapid rate for 2 years, and then to increase it at a constant rate of 8.00%thereafter. Management's forecast of the future dividend stream, alongwith the forecasted growth rates, is shown below. Assuming a requiredreturn of 11.00%, what is your estimate of the stock's current value?Year0.136.Growth rateNANANANA50.00% 25.00% 8.00%DividendsPO.000 PO.000 PO.000 P0.250 PO.375 PO.469 PO.506O P10.45O P10.99OP9.94O P10.72O P10.19

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Answered: Agarwal Technologies was founded 10…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Capital Budgeting with Taxes (Non-MACRS Depreciation); Sensitivity Analysis GravinaCompany is planning to spend $6,000 for a machine that it will depreciate on a straight-line basisover 10 years with no salvage value. The machine will generate additional cash revenues of $1,200 ayear. Gravina will incur no additional costs except for depreciation. Its income tax rate is 35%. Thepresent value annuity factor for 15%, 10 years (from Appendix C, Table 2) is 5.019.Required1. What is the payback period of the proposed investment (in years, and rounded to 1 decimal place) underthe assumption that the cash inflows occur evenly throughout the year?2. What is the accounting (book) rate of return (ARR) based on the initial investment outlay? Round youranswer to 1 decimal place (e.g., 13.571% = 13.6%).
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