ZuoTi.Pro
Question

After finishing your first finance class, you decide to start your own investment plan. Your first...

After finishing your first finance class, you decide to start your own investment plan. Your first stock to purchase is Walgreen’s (WAL). You are confident enough to project next year’s dividend as $1.00. However, you are unsure of future dividends, so you just assume they will grow at 5.00% per year going forward each year. If you want a 15.00% return on your investment, what value do you place on the stock today?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

D1=Next Years Dividend =$1.00

g=Dividend growth rate =5%=0.05

R=Required return on investment =15%=0.15

Current Fair Price =P0

P0=D1/(R-g)

Current fair market price of the stock=1.00/(0.15-0.05)=$10.00

Value of the stock today=$10

0 0
Add a comment
Know the answer?
Add Answer to:
After finishing your first finance class, you decide to start your own investment plan. Your first...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • #1 Van Buren, Inc., currently pays $2.24 per share in dividends on its common stock. Dividends...

    #1 Van Buren, Inc., currently pays $2.24 per share in dividends on its common stock. Dividends are expected to grow at 7.00 % per year forever. If you require a 13.00 % rate of return (i.e., the discount rate) on this investment, what value would you place on a share of Van Buren common stock? Assume that the current dividend was just paid. Answer format: Currency: Round to 2 decimal places # 2 Bad Investment Incorporated has "promised" investors to...

  • please help for the excel assignment of the finance You decide to start saving $850 quarterly...

    please help for the excel assignment of the finance You decide to start saving $850 quarterly beginning today. How much will you have saved by the time you reach your planned retirement age 40 years from today if you can earn 5.2% on your savings? $850.00 5.2% 40 4 You win the lottery and have a choice of receiving annual payments (beginning one year from today) of $50,000 for 25 years - or a lump sum of $875,000. If the...

  • You are planning for your pension plan that you will start to invest money, deposit first...

    You are planning for your pension plan that you will start to invest money, deposit first saving a year from today, deposit last at 20, and get retired after 20 years. You desire to take an immediate trip, costing approximately 15000 TL.(t=20) when you retire, and expect to live 25 more years, for which you need 12000TL each year, starting from one year from retirement. Your savings will be equal and on annual basis. Savings will earn 10% annually. a)...

  • When you start your first full-time job, you plan to open a retirement savings account. Your...

    When you start your first full-time job, you plan to open a retirement savings account. Your goal is to retire 25 years from the day you start working. You will use a retirement investment account that pays 5.5% nominal interest, compounded annually, and you want to have exactly $400,000 in that account when you retire. You will make end of year deposits every year for the 25 years working, and you expect your income will increase 4% per year throughout...

  • You decide to take advantage of the current online dating craze and start your own Web...

    You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 550 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 29 percent in the first two years, 21 percent in year 3, and 18 percent in Year 4. How many members do you expect to have at the end of four years?

  • You decide to take advantage of the current online dating craze and start your own Web...

    You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 450 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 25 percent in the first two years, 21 percent in year 3, and 18 percent in Year 4. How many members do you expect to have at the end of four years?

  • You decide to take advantage of the current online dating craze and start your own Web...

    You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 550 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 29 percent in the first two years, 21 percent in year 3, and 18 percent in Year 4. How many members do you expect to have at the end of four years?

  • After graduation you decide to buy your first car. You decide you want to get a...

    After graduation you decide to buy your first car. You decide you want to get a Toyota because it has a 5 year/50,000 mile warranty. You buy a 2019 Toyota Camry for $35,000 and finance the vehicle through a Bank. Today’s new car loans are 4.29% APR. a. (2 points) If you finance this car for 66 months, what is your monthly payment? b Create an amortization table showing monthly payment, monthly interest and monthly principle paid. After the first...

  • 2. Imagine you start your own ice cream company, and the cashflows for the first 5...

    2. Imagine you start your own ice cream company, and the cashflows for the first 5 years are given as follows: Initial Investment (Co) $100,000 Year 1 -$25,000 Year 2 -$5,000 Year 3 $50,000 Year 4 $150,000 Using 15% for discounting, what is the net present value (NPV) of this investment? Find the internal rate of return (IRR). Do you make the investment? Why? If you suddenly decide that you want a 10% return your first 4 years in business,...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT