Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from today. The dividend should grow rapidly-at a rate of 43% per year-during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 12%, what is the value of the stock today

Value of stock today = $35.32

Explanation:

PV of dividend payable in year 3

= 1.75× (1.12)^(-3)

= 1.245

PV of Dividend in year 4

1.75× (1.43) × 1.12^(-4)

=1.590

PV of dividend in year 5

1.75 × (1.43)^2 × 1.12^(-5)

=2.030

PV of Dividend from year 6 onward

Step 1: calculate the PV (in year 5 term)

(1.75 × (1.43)^2)× (1.05)/(0.12-0.05)

=53.67

Step 2: re-discount to get PV in year 0 term

53.67 × 1.12^(-5)

=30.45

Value of stock today

1.245 +1.590 + 2.030+30.45

=35.32

Value of stock today = $35.32

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

the correct answer is - no.

winnipeg, canada, is not further away from the equator than moscow, russia, in fact moscow is the city that is further away from the equator. moscow is on a latitude of 55.7558° north, while winnipeg is on a latitude of 49.8951° north, thus putting moscow by 5.8607° further away from the equator than winnipeg is.