Author Question: One of the arguments that analysts use to justify the high stock valuations for technology firms is ... (Read 17 times)

mspears3 · **on:** Apr 25, 2021

One of the arguments that analysts use to justify the high stock valuations for technology firms is that they are very risky during their start-up years but become less risky as the technology becomes widely adopted. Consider trying to value a company called TechCorp on Jan 1. It pays dividends annually at midnight on Dec 31. The last dividend (yesterday) was $1. Dividends were expected to grow for two years at 10% and then settle down to a long-run growth rate of 5% in perpetuity. Because of the initial riskiness of the company, investors required a 20% rate of return over the first two years, but only a 12% rate of return thereafter. The time line of dividends is as follows. What is a fair price for TechCorp on Jan 1?

◦ $8.70
◦ $12.60
◦ $13.44
◦ $13.52
◦ $14.53

skipfourms123 · **Reply #1 on:** Apr 25, 2021

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 59% of students answer this correctly