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SMG FE 101 Study Guide - Final Guide: Common Cold

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hahn
20 Mar 2022
School
Boston University
Department
Finance
Course
SMG FE 101
Professor
Cornelia Newell

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Document Summary

Sinclair pharm, a small drug company, develops a vaccine that will cure the common cold. It is expected that sp will experience extremely high growth over the next 3 years and will reinvest all of its earnings in expanding the company over this time. Earnings were . 20/share before the development of the vaccine and are expected to grow by 40% per year for the next 3 years. After this time, it is expected growth will drop to 5% and stay there for the expected future. 4 years from now, sp will pay dividends that are 75% of its earnings. You expect bean enterprises will have earnings per share of for the coming year. Bean plans to retain all of its earnings for the next 3 years. For years 4 an 5, the firm plans on retaining 50% of its earnings. All re will be invested in projects with an expected return of 20% per year.

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