JUST NOW, Von Bora Corporation (VBC) has paid a $3.4 dividend per share. If you expect...

Question

Question

Answer 1

Answer #1

Option A is correct

g = growth rate = 6.1%

ke = VBC's Equity Cost of Capital = 13%

Dividend paid = D0 = $3.4 per share

Dividend in next year = D1 = D0 * (1+g) = $3.4 * (1+6.1%) = $3.6074

Value of share of VBC stock = D1 / (ke - g)

= $3.6074 / (13%-6.1%)

= $3.6074 / 6.9%

= $52.2811594

Therefore, Value of share of VBC stock is $52.28

Answer 2

Similar Homework Help Questions

7.) Von Bora Corporation (VBC) is expected to pay a $ 3.00 dividend at the end...

7.) Von Bora Corporation (VBC) is expected to pay a $ 3.00 dividend at the end of this year. If you expect VBC's dividend to grow by 6% per year forever and VBC's equity cost of capital is 10%, then the value of a share of VBS stock is closest to: 8.) NoGrowth Industries presently pays an annual dividend of $ 1.00 per share and it is expected that these dividend payments will continue indefinitely. If NoGrowth's equity cost of...
Suppose you plan to hold Von Bora stock for only one year. Your capital gain rate from holding Von Bora stock for the first year is closest to:

Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year. You expect Von Bora's stock price to be $25.00 at the end of two years. Von Bora's equity cost of capital is 10%.Suppose you plan to hold Von Bora stock for only one year. Your capital gain from holding Von Bora stock for the first year is?Answer is $0.95
Assume a corporation has just paid a dividend of $ 4.24 per share. The dividend is...

Assume a corporation has just paid a dividend of $ 4.24 per share. The dividend is expected to grow at a rate of 2.9% per year forever, and the discount rate is 9.3%. What is the Capital Gains yield of this stock?

Assume a corporation has just paid a dividend of $ 3.28 per share. The dividend is...

Assume a corporation has just paid a dividend of $ 3.28 per share. The dividend is expected to grow at a rate of 3.9% per year forever, and the discount rate is 6.2%. What is the Capital Gains yield of this stock?
Assume a corporation has just paid a dividend of $ 1.24 per share. The dividend is...

Assume a corporation has just paid a dividend of $ 1.24 per share. The dividend is expected to grow at a rate of 3.9% per year forever, and the discount rate is 9.3%. What is the Capital Gains yield of this stock?
Assume a corporation has just paid a dividend of $ 2.13 per share. The dividend is...

Assume a corporation has just paid a dividend of $ 2.13 per share. The dividend is expected to grow at a rate of 2.4% per year forever, and the discount rate is 8.1%. What is the dividend yield of this stock?

A company just paid a dividend of $1.70 per share. You expect the dividend to grow...

A company just paid a dividend of $1.70 per share. You expect the dividend to grow 13% over the next year and 9% two years from now. After two years, you have estimated that the dividend will continue to grow indefinitely at the rate of 4% per year. If the required rate of return is 12% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)
Jackson Holding has just paid an annual dividend of $0.45 per share. Analysts expect the firm's...

Jackson Holding has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 7% forever. Its stock price is $37.8. Question 1: What is the cost of equity from retained earnings?
LLOP corporation just paid 4$ dividend per share, you expect the dividend to grow 8% for...

LLOP corporation just paid 4$ dividend per share, you expect the dividend to grow 8% for the next 2 years and expect to sell the stock at $50 at the end of year 2. What is the maximum prie you would pay to buy the stock? the required rate of return is 15%.

Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's...

Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 5% forever. Its stock price is $37.4 and its beta is 1.3. The risk-free rate is 2% and the expected return on the market portfolio is 8%. Part 1 What is the best guess for the cost of equity?