A company currently pays a dividend of $3.5 per share (D0 = $3.5). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 0.9, the risk-free rate is 3%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
Required Return, rs = Risk-free Rate + Beta * Market Risk
Premium
Required Return, rs = 3.00% + 0.90 * 6.00%
Required Return, rs = 8.40%
Last Dividend, D0 = $3.50
Growth rate for next 2 years is 25% and a constant growth rate (g) of 5% thereafter
D1 = $3.50 * 1.25 = $4.375
D2 = $4.375 * 1.25 = $5.46875
D3 = $5.46875 * 1.05 = $5.7421875
P2 = D3 / (rs - g)
P2 = $5.7421875 / (0.084 - 0.05)
P2 = $168.8879
P0 = $4.375/1.084 + $5.46875/1.084^2 + $168.8879/1.084^2
P0 = $152.42
So, the current stock price is $152.42
A company currently pays a dividend of $3.5 per share (D0 = $3.5). It is estimated...
A company currently pays a dividend of $3.5 per share (D0 = $3.5). It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.5, the risk-free rate is 3.5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Round your answer to the nearest cent.
A company currently pays a dividend of $1.75 per share (D0 = $1.75). It is estimated that the company's dividend will grow at a rate of 18% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 0.9, the risk-free rate is 7%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...
A company currently pays a dividend of $3.8 per share (D0 = $3.8). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.6, the risk-free rate is 7%, and the market risk premium is 3.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...
Problem 7-05 Nonconstant Growth Valuation A company currently pays a dividend of $3.5 per share (D0 = $3.5). It is estimated that the company's dividend will grow at a rate of 21% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 2, the risk-free rate is 4.5%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round...
A company currently pays a dividend of $4 per share (D0 = $4). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, then at a constant rate of 5% thereafter. The company's stock has a beta of 1.9, the risk-free rate is 3%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to...
A company currently pays a dividend of $2.25 per share (D0 = $2.25). It is estimated that the company's dividend will grow at a rate of 24% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 0.95, the risk-free rate is 8%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...
A company currently pays a dividend of $3.25 per share (D0 = $3.25). It is estimated that the company's dividend will grow at a rate of 18% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.25, the risk-free rate is 8%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...
A company currently pays a dividend of $3.25 per share (D0 = $3.25). It is estimated that the company's dividend will grow at a rate of 24% per year for the next 2 years, then at a constant rate of 5% thereafter. The company's stock has a beta of 1.9, the risk-free rate is 5%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to...
A company currently pays a dividend of $2.4 per share (D0 = $2.4). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.5, the risk-free rate is 8%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...
A company currently pays a dividend of $2.8 per share (D0 = $2.8). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk-free rate is 7%, and the market risk premium is 2.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...