help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Martell Mining Company's ore reserves are being depleted, so its sales are falling

Martell Mining Company's ore reserves are being depleted, so its sales are falling

Finance

Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If current dividend is $5 and required rate of return 28.60%, what is the value of Martell Mining's stock?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Value of the Martell Mining's Stock
Current dividend per share (D0) = $5.00 per share
Dividend growth rate (g) = -5.00%
Required rate of return (Ke) = 28.60%
Price of the Stock = D0(1 + g) / (Ke - g)
Price of the Stock = $5.00(1 - 0.05) / (0.2860 - - 0.05)
Price of the Stock = ($5.00 x 0.95) / (0.2860 + 0.05)
Price of the Stock = $4.75 / 0.3360
Price of the Stock = $14.14 per share  
 
Therefore, the Value of the Martell Mining's Stock will be $14.14

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)