Assume a firm pays $2.00 in dividends and is expected to grow at 10% per year...
Assume a firm pays $2.00 in dividends and is expected to grow at 10% per year indefinitely. The expected rate of return on other securities of comparable risk is 20%. What should the stock sell for in the stock market?
Homework Answers
value of stock = dividend next year/(Required return - growth rate)
= 2 * 1.1/(0.2-0.1)
= 22
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Assume a firm pays $2.00 in dividends and is expected to grow at
10% per year...
Questions 4-6 4. Firm Y currently pays a dividend of $1.22, which is expected to grow...
Questions 4-6
4. Firm Y currently pays a dividend of $1.22, which is expected to grow indefinitely at 5%. If the current value of the firm's shares based on constant-growth DDM is $32.03, what is the required rate of return? 5. MM Corp, has an ROE of 16% and a plowback ratio of 50%. If the coming year's earnings are expected to be s per share, at what price will the stock sell? The market capitalization rate is 12%. 6....
XYZ’s stock paid $2.00 dividend last year. The company’s earnings and dividends are expected to grow...
XYZ’s stock paid $2.00 dividend last year. The company’s earnings and dividends are expected to grow at an annual rate of 5%. Given its risk, if the investors’ required rate of return on the stock is 15%, what is the market value of XYZ’s stock?
Assume your firm's dividends per share are expected to grow indefinitely by 3% a year. Next...
Assume your firm's dividends per share are expected to grow indefinitely by 3% a year. Next year's dividend is $4.50 and the required rate of return (i.e. equity holder's opportunity cost of capital) is 8%. Assuming this is the best information available regarding the future of this firm, what would be the most economically rational value of the stock today (i.e. today's "price")? 56.25 150.00 90.00 92.70 45.00
You want to buy a stock. The last dividend was $2.00. Dividends are expected to grow...
You want to buy a stock. The last dividend was $2.00. Dividends are expected to grow at 9.00% per year for 3 years and then in year 4, the growth rate will slow to 5.00% per year. That 5.00% rate will continue indefinitely into the future. If you demand a 12.00% annual return on your investment, what will you be willing to pay for a share? Round answer to the nearest penny. $27.65 $33.34 $34,39 $38.85 $40.33
Miltmar corporation will pay a year-end dividends of $3, and dividends thereafter are expected to grow...
Miltmar corporation will pay a year-end dividends of $3, and dividends thereafter are expected to grow at the constant rate of 5% per year. the risk-free rate is 5%, and the expected return on the market portofolio is 10%. the stock has a beta of 0.85
The FI Corporation’s dividends per share are expected to grow indefinitely by 8% per year. a....
The FI Corporation’s dividends per share are expected to grow indefinitely by 8% per year. a. If this year’s year-end dividend is $4.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share...
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. a....
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share...
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year a....
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year a. If this year's year-end dividend is $4.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $12.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year. . Using the discounted cash flow approach, what is is cost of equity? b. If the firm's beta is 1.6, the risk-free rate is 9%, and the expected return on the...
Multistage Growth A firm projects that dividends will grow at a rate of 10% per year...
Multistage Growth A firm projects that dividends will grow at a rate of 10% per year for four years and then will grow at a rate of 4% per year forever. The stock's required return is 12% and the last annual dividend paid was $1.50. The most an investor should be willing to pay for this stock today is ______. (Watch your rounding, carry out dividends to four or more decimal places.) $23.88 $28.55 $27.22 $21.94 and explain
Questions 4-6
4. Firm Y currently pays a dividend of $1.22, which is expected to grow indefinitely at 5%. If the current value of the firm's shares based on constant-growth DDM is $32.03, what is the required rate of return? 5. MM Corp, has an ROE of 16% and a plowback ratio of 50%. If the coming year's earnings are expected to be s per share, at what price will the stock sell? The market capitalization rate is 12%. 6....
You want to buy a stock. The last dividend was $2.00. Dividends are expected to grow at 9.00% per year for 3 years and then in year 4, the growth rate will slow to 5.00% per year. That 5.00% rate will continue indefinitely into the future. If you demand a 12.00% annual return on your investment, what will you be willing to pay for a share? Round answer to the nearest penny. $27.65 $33.34 $34,39 $38.85 $40.33
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share...
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year a. If this year's year-end dividend is $4.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $12.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year. . Using the discounted cash flow approach, what is is cost of equity? b. If the firm's beta is 1.6, the risk-free rate is 9%, and the expected return on the...
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