DBP Inc. just paid a dividend of $1.10. The expected growth rate of dividend is 8 percent. The required return for investors in the first three years is 20 percent and 15 percent for the following three years. After those six years, the required return is 10 percent. What is the current share price of the stock?
A. $40.67
B. $36.98
C. $41.77
D. $39.12
ANSWERT
Correct answer is Option (A)=$40.67
Current share price of the stock = D1/1.20 + D2/1.20^2 + D3/1.20^3 + D4/(1.20^3 *1.15)+ D5/(1.20^3 *1.15^2)+ D6/(1.20^3 *1.15^3) + (D7/(Re-g))/(1.20^3 *1.15^3)
Current share price of the stock = 1.10*1.08/1.20 + 1.10*1.08^2/1.20^2 + 1.10*1.08^3/1.20^3 +1.10*1.08^4/(1.20^3 *1.15)+ 1.10*1.08^5/(1.20^3 *1.15^2)+ 1.10*1.08^6/(1.20^3 *1.15^3) +(1.10*1.08^7/(10%-8%))/(1.20^3 *1.15^3)
Current share price of the stock = $ 40.67
_____________________________________________
If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.
*****************THANK YOU**************
DBP Inc. just paid a dividend of $1.10. The expected growth rate of dividend is 8...
Stock Valuation Bretton, Inc., just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year, indefinitely. Investors require a 15 percent return on the stock for the first three years, a 13 percent return for the next three years, and then an 11 percent return thereafter. What is the current share price for the stock?
TUV Inc., just paid a dividend of $4.5 per share on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require an 20 percent return on the stock for the first three years, then a 12 percent return for the next three years, and then an 9 percent return thereafter. What is the current share price? Answer to two decimals, carry intermediate calcs. to four decimals.
Sea Side, Inc., just paid a dividend of $1.96 per share on its stock. The growth rate in dividends is expected to be a constant 3.1 percent per year indefinitely. Investors require a return of 25 percent on the stock for the first three years, then a 20 percent return for the next three years, and then a 18 percent return thereafter. What is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places....
1. The last dividend paid by Corporation was $1.00. Corporation’s growth rate is expected to be 5 percent forever. Corporation’s required rate of return on equity is 12 percent. What is the current price of Corporation’s common stock? 2. Corporation has paid a $1.00 dividend every year on its preferred stock since its inception in 1967. Investors demand a 7 percent required return on the stock. What should Corporation’s stock trade for in the market? 3. The last dividend paid by Corporation...
Rasheed Farm just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 4.5 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years and a return of 11 percent thereafter. What is the current share price?
Mariota Corp. just paid a dividend of $3.45 per share on its stock. The dividend growth rate is expected to be 4.05 forever and investors require a return of 11.9 percent on this stock. What will the stock price be in 11 years?
Bayou Okra Farms just paid a dividend of $3.05 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 12 percent for the first three years, return of 10 percent for the next three years, and a return of 8 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, ... 32.16.) Current share price =...
Bayou Okra Farms just paid a dividend of $3.95 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 14 percent for the first three years, a return of 12 percent for the next three years, and a return of 10 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
James Co. just paid a dividend of $3.00 on its stock. The growth rate in dividends is expected to be 30% in the up period, which lasts from year 1 to year 5. The growth rate will then drop to -5% in the down period that lasts from year 6 to year 7. It will then stabilize at 4% thereafter. Investors in James Co. require a 15 percent return on the stock for the first five years, a 12 percent...
Bayou Okra Farms just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 4.5% per year indefinitely. Investors require a return of 15% for the first three years, a return of 13% for the next three years, and a return of 11% thereafter. What is the current share price?