ZuoTi.Pro
Question

Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock...

Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock to pay a dividend of $0.75 per share at the end of Year 1 and $1.75 per share at the end of Year 2. You believe you can sell the stock for $15.50 at the end of Year 2. What is the value per share of the company’s stock if the required rate of return is 12 percent?

$14.42 Please Show all Work Typed Out as I am on Mobile

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The Price of the Company’s Stock is the Present Value of the Future Dividend Payments plus the Present Value of the Selling Price of the Stock at the end of year 2

Therefore, The Price of the Stock = [D1/(1 + r) 1] + [D2/(1 + r) 2] + [P2/(1 + r) 2]

= [$0.75/(1 +0.12)1] + [$1.75/(1 + 0.12)2] + [$15.50/(1 + 0.12)2]

= [$0.75/1.12] + [$1.75/1.2544] + [$15.50/1.2544]

= $0.67 + $1.39 + $12.36

= $14.42

“Hence, The value per share of the company’s stock = $14.42 per share”

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the...

    1. Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock to pay a dividend of $0.75 per share at the end of Year 1 and $1.75 per share at the end of Year 2. You believe you can sell the stock for $15.50 at the end of Year 2. What is the value per share of the company’s stock if the required rate of return is 12 percent? $14.42 Please Show All Work.

  • Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock...

    Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock to pay a dividend of $0.75 per share at the end of Year 1 and $1.75 per share at the end of Year 2. You believe you can sell the stock for $15.50 at the end of Year 2. What is the value per share of the company’s stock if the required rate of return is 12 percent?

  • Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock...

    Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock to pay a dividend of $0.75 per share at the end of Year 1 and $1.75 per share at the end of Year 2. You believe you can sell the stock for $15.50 at the end of Year 2. What is the value per share of the company’s stock if the required rate of return is 12 percent? Please Show Work.

  • Q4) Suppose you are thinking of purchasing the stock of Moore Ofl, Inc. You expect it...

    Q4) Suppose you are thinking of purchasing the stock of Moore Ofl, Inc. You expect it to pay a $2 dividend in one year, and you believe that you can sell the stock for $14 at that time. If you require a return of 20% on investments of this risk, what is the maximum you would be willing to pay? FV+D/(1+r) Zero Growth Model Q5) Suppose stock is expected to pay a S0.50 dividend every quarter and the required return...

  • Suppose you are thinking of purchasing the stock of TTYL Widget, Inc.  You expect it to pay...

    Suppose you are thinking of purchasing the stock of TTYL Widget, Inc.  You expect it to pay a $3.00 dividend in one year.  You believe you can sell the stock for $21.00 at that time.  You require a return of 15% on investments of this risk.  What is the maximum you would be willing to pay? Suppose you are thinking of purchasing the stock of TTYL Widget, Inc.  In addition to the dividend and price from year one you expect it to pay a $3.30...

  • Suppose you are thinking of purchasing the stock of ABC, Inc. and you expect it to...

    Suppose you are thinking of purchasing the stock of ABC, Inc. and you expect it to pay a $2 dividend in one year from now, and dividend of $2.40 in two year from now and you believe that you can sell the stock for $13.50 at the end of year 2. If you require a return of 10% on investments of this risk, what is the intrinsic value of the stock at current time?

  • Suppose you are thinking of purchasing the stock of WHATUPDAWG, Inc.  In addition to the dividend and...

    Suppose you are thinking of purchasing the stock of WHATUPDAWG, Inc.  In addition to the dividend and price from year one you expect it to pay a $4.60 dividend in two years.  You believe you can sell the stock for $28.75 at that time.  You require a return of 10% on investments of this risk.  What is the maximum you would be willing to pay? Suppose you are thinking of purchasing the stock of Super Dawgs, Inc.  In addition to the dividend and price from...

  • The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and...

    The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the yield to maturity for these bonds is 7.22%. What is the market price per bond? $986.81 S.S. Corporation’s bonds will mature in 15 years. The bonds have a face value of $1,000 and an 6.5 percent coupon rate, paid semiannually. The price of the bonds is $1,050. What is the yield to maturity? 5.99% Callaghan Motor’s bonds...

  • You are considering the purchase of a share of Alfa Growth, Inc. common stock. You expect...

    You are considering the purchase of a share of Alfa Growth, Inc. common stock. You expect to sell it at the end of one year for $76.33 per share. You will also receive a dividend of $4.64 per share at the end of the next year. If your required return on this stock is 8.99 percent, what is the most you would be willing to pay for Alfa Growth, Inc. common stock now? Round the answer to two decimal places.

  • You expect a share of stock to pay dividends of $1.5, $1.75, and $2 in each...

    You expect a share of stock to pay dividends of $1.5, $1.75, and $2 in each of the next 3 years. You believe the stock will sell for $15 at the end of the third year. What is the stock price if the discount rate for the stock is 10 percent?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT