Calculating Dividend one year from now(D1)
Since the Portman Industries just paid a dividend, therefore
Current dividend = D0 = $1.44, Growth rate of dividends over next year = 16%
Dividend one year from now = D1 Current dividend (1+Growth rate of dividends over next year) = 1.44 (1+16%) = 1.44 x 1.16 = 1.6704
Dividends one year from now = $1.6704
Calculating Horizon Value (P1)
Required rate of return on stock = r = Risk free rate + Beta x market risk premium = 4% + 1.30 x 4.80% = 4% + 6.24% = 10.24%
Constant growth rate of dividends after year 1 = g = 3.20%
Now using Constant growth rate model
Horizon value = P1 = [D1(1+g)] / (r-g) = [1.6704(1+3.20%)] / (10.24% - 3.20%) = 1.72385 / 7.04% = 24.4865
Horizon Value = $24.4865
Calculating Intrinsic value of stock
Intrinsic value of stock = Present value of dividend in year 1 + Present value of Horizon value at end of year 1
Intrinsic value of stock = 1.6704 / (1+10.24%) + 24.4865 / (1+10.24%) = 1.5152 + 22.2119 = 23.7271
Hence Intrinsic value of Portman's Stock = $23.7271
Calculating Expected dividend yield of Stock today
Expected dividend = D1 = 1.6704
Expected dividend yield today = D1 / Intrinsic value of stock = 1.6704 / 23.7271 = 7.0401%
which is approximately equal to 7.06%
Answer: 7.06%
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead...
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.44 per share. The company expects the coming year...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries: Portman Industries just paid a dividend of $2.16 per share....
As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company’s stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.44 per share. The company expects the coming year...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $2.88 per share. The company...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $2.40 per share. The company...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.92 per share. The company...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company...
8. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $3.12 per share. The company...
3. Nonconstant growth stock As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $2.88 per share. The company...