Okay, so here is some info on a start up company...
-total after tax earnings $2million in 2006.
(25% paid as dividend, 75% retained for financing)
-Payout policy will remain unchanged for 2 years (incl. 2007), after which it will retain only 40% of after tax earnings.
-Company earnings will grow at a rate of 50% per yr starting now (beginning of 07') for a duration of 3 years.
-After which, company will grow at a rate of 8% per year forever after.
-Company's cost of equity = 15%.
Now- I need to use the Dividend growth model (as of jan 07') to find the value.
Also- I need to find the new value, assuming that the cost of equity during the high risk start up years (1 and 2) is really 20% and 15% thereafter...
Can anyone help?
Thanks!
2007-03-15
05:35:45
·
2 answers
·
asked by
chrismick98
1