Rentz RVs Inc. (RRV) is presently enjoying relatively high growth because of a surge....
Question # 00035559
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Updated on: 12/10/2014 06:44 AM Due on: 05/31/2015
Rentz RVs Inc. (RRV) is presently enjoying relatively high growth because of a surge in the demand for recreational vehicles. Management expects earnings and dividends to grow at a rate of 30% for the next 4 years, after which high gas prices will probably
reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25. RRV’s beta is 1.20, the market risk premium is 4.50%, and the risk-free rate is 3.00%. What is the intrinsic value of RRV’s common stock? 7.
Using the information on Rentz RVs Inc. from problem 6, what is the dividend yield expected for the next year?
reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25. RRV’s beta is 1.20, the market risk premium is 4.50%, and the risk-free rate is 3.00%. What is the intrinsic value of RRV’s common stock? 7.
Using the information on Rentz RVs Inc. from problem 6, what is the dividend yield expected for the next year?
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Solution: Rentz RVs Inc. (RRV) is presently enjoying relatively high growth because of a surge