Homework Answers
1.
Terminal growth rate of dividends is less than required return or
cost of equity. This assumption is justified because growth rate
cannot be indefinitely higher than required return
2.
Terminal growth rate is constant. This assumption is justified
because companies generally fix the dividend payout and thus the
growth
3.
Company is expected to pay dividends
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F UCIUS Dividend Growth Model Under what two assumptions can we use the dividend growth model...
Under what two assumptions can we use the dividend growth model presented in the chapter to...
Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock? Comment on the reasonableness of these assumptions.
please answe 1,3 and 11 not answers in pictures please REVIEW AND CRITICAL THINKING QUESTIONS 1....
please answe 1,3 and 11
not answers in pictures please
REVIEW AND CRITICAL THINKING QUESTIONS 1. Stock Valuation (L01] Why does the value of a share of stock depend on dividends 2. Stock Valuation [L01] A substantial percentage of the companies listed on the NYSE and NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question 3. Dividend Policy [L01] Referring to the previous questions,...
Chapter 7 - Master it! In practice, the use of the dividend discount model is refined...
Chapter 7 - Master it! In practice, the use of the dividend discount model is refined from the method we presented in the textbook. Many analysts will estimate the dividend for the next 5 years and then estimate a perpetual growth rate at some point in the future, typically 10 years. Rather than have the dividend growth fall dramatically from the fast growth period to the perpetual growth period, linear interpolation is applied. That is, the dividend growth is projected...
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth...
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth model to analyze stock prices? 2. (2 pts) HB Computer has just paid a dividend of $1 (DO) and the growth rate in dividend is expected to be 6% per year into the future. The company's required råte of return Ke is 12%. How much should investors pay for the growth of the company? (i.e., Estimate the value of growth for this company.)
Use the Constant Dividend Growth Model to compute the expected price of a stock in 2...
Use the Constant Dividend Growth Model to compute the expected price of a stock in 2 years. Each share is expected to pay a dividend of $1.91 in one year. Investors' annual required rate of return is 16.2%, and the expected growth rate of the dividend is 5% per annum. Answer to the nearest penny. Answer:
Use the dividend growth model to determine the required return for equity. Use the following information:...
Use the dividend growth model to determine the required return for equity. Use the following information: Price $20.00 Anticipated Dividend $.75 constant growth rate 3% per year flotation cost 8% per share OA) 6.83% B) 7.08% OC) 7.19% OD) 10.20%
Common stock value - Constant growth Use the constant growth model (Gordon growth model) to find...
Common stock value - Constant growth Use the constant growth model (Gordon growth model) to find the value of the firm shown in the following Dividend expected next year $1.13 Dividend growth rate 7.5% Required return 13.3% The value of the firm's stock is
QUESTION TWO (2) Gordon's Wealth Growth Model was initially developed by Gordon and Shapiro in 1950...
QUESTION TWO (2) Gordon's Wealth Growth Model was initially developed by Gordon and Shapiro in 1950 and later refined by Gordon in 1962 based on the premise that dividends grow at a constant rate in perpetuity Nonetheless, this assumption does not hold in reality because projections of dividends cannot be made for an indefinite period, hence, Various versions of the dividend discount model have been developed These models were developed based on different assumptions concerning future growth The simplest form...
IBM has generated annual dividend growth of 15.1% over the past 3 years. IBM's most recent...
IBM has generated annual dividend growth of 15.1% over the past 3 years. IBM's most recent annual dividend is $2.90. Assume IBM will continue to increase dividends at 15.1% for the next 5 years before reducing its dividend growth to 6% for the long term. Also assume that the required return for IBM stock is 9.5%. It is currently trading for $179.90. Use the two-stage dividend discount model to determine the current intrinsic value for IBM given these assumptions. Is...
Which of the following is not true? Group of answer choices The dividend growth model seeks...
Which of the following is not true? Group of answer choices The dividend growth model seeks to estimate the current market value of a stock by calculating the total future value of the future dividend payments. The dividend growth model cannot be used to estimate the current market value of stocks of firms that don’t issue any dividends. There are ways other than the dividend growth model to conduct stock valuation, including multiplying a benchmark Price-to-Earnings ratio with earnings per...
please answe 1,3 and 11
not answers in pictures please
REVIEW AND CRITICAL THINKING QUESTIONS 1. Stock Valuation (L01] Why does the value of a share of stock depend on dividends 2. Stock Valuation [L01] A substantial percentage of the companies listed on the NYSE and NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question 3. Dividend Policy [L01] Referring to the previous questions,...
Chapter 7 - Master it! In practice, the use of the dividend discount model is refined from the method we presented in the textbook. Many analysts will estimate the dividend for the next 5 years and then estimate a perpetual growth rate at some point in the future, typically 10 years. Rather than have the dividend growth fall dramatically from the fast growth period to the perpetual growth period, linear interpolation is applied. That is, the dividend growth is projected...
Short Answers 1. (2 pts) What are the two assumptions when one applies the constant growth model to analyze stock prices? 2. (2 pts) HB Computer has just paid a dividend of $1 (DO) and the growth rate in dividend is expected to be 6% per year into the future. The company's required råte of return Ke is 12%. How much should investors pay for the growth of the company? (i.e., Estimate the value of growth for this company.)
Use the dividend growth model to determine the required return for equity. Use the following information: Price $20.00 Anticipated Dividend $.75 constant growth rate 3% per year flotation cost 8% per share OA) 6.83% B) 7.08% OC) 7.19% OD) 10.20%
QUESTION TWO (2) Gordon's Wealth Growth Model was initially developed by Gordon and Shapiro in 1950 and later refined by Gordon in 1962 based on the premise that dividends grow at a constant rate in perpetuity Nonetheless, this assumption does not hold in reality because projections of dividends cannot be made for an indefinite period, hence, Various versions of the dividend discount model have been developed These models were developed based on different assumptions concerning future growth The simplest form...
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