P0 = D1 / (r-g)
P0 = $39/share, D0 = $4/share, D1: 4 (1+.035) = $4.14.
39 = 4.14 / (r-.035)
r = 14% (Approx)
***10-5c DCF Approach Solve for required return The dividend paid at the beginning of the first...
10-5a CAPM Appronch Calculate the cost of equity financing given the following Risk-free ratc 1% Market risk premium: 7% 1.25 Beta: 10-5b Bond-Yield-Plus-Risk-Premium Approsch The return on a bond is 4% while the return on common is 5%. What is the risk premium? 10-5e DCE Approach Solve for required return given the following The dividend paid at the beginning of the first time period (Du) was fa/share. The dividend grows in perpetuity at 3.5% (growth rate g). The price of...
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Calculate the current price of a stock given the following information: A dividend has a growth rate of 0% for the first two periods. Beginning period 3 and continuing in perpetuity, the dividend grows at 4%. The required rate of return is 7%, Do-S2.00 The current price of a stock would be S63 per share 9-7a Corporate Valuation Model A firm has $20 million of debt and $30 million of preferred stock. It has an expected free cash flow (FCF)...
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Santa Klaus Toys just paid a dividend of $3.90 per share. The required return is 11.2 percent and the perpetual dividend growth rate is 3.5 percent. What price should this stock sell for five years from today?
A stock just paid a dividend of Do = $1.50. The required rate of return is rs=15.0%, and the constant growth rate is g=4.0%. What is the current stock price?
Quantitative Problem 1: Hubbard Industries just paid a common dividend, Do, of $1.90. It expects to grow at a constant rate of 4% per year. If investors require a 9% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share Zero Growth Stocks: The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is...
Metlock Mechanical Inc.’s first dividend of $3.3 per share is
expected to be paid six years from today. From then on, dividends
will grow by 10 percent per year for five years. After five years,
the growth rate will then slow to 5 percent per year in perpetuity.
Assume that Metlock’s required rate of return is 15 percent. What
is the price of a share of Metlock Mechanical today?
(Round present value factor calculations to 5 decimal
places, e.g. 1.15612....
8. Ortiz Power Tools Co. recently paid a $0.80 per share dividend on its stock. The company expects to t is be able to increase its dividend by 20% in each of the next two years and then by an annual growth rate of 8% for the foreseeable future, what is the current price of the stock assuming the marke in equilibrium and a required rate of return of 12.5%? a. Compute the following dividend values. Supporting Calculation Di D2...
Question 4. Stock valuation (2 points) a) Assume that a stock has the same dividend paid in perpetuity. Find the value of the stock with a $2 annual dividend if the required return is 2%. b) Now assume that the stock's dividend is $1 and it grows at 2% every year. Assuming a constant rate of growth and a required return of 3%, find the value of the stock.