Question

1st drop down options: $47.89, $28.77, $45.71, $51.31

Super Carpeting Inc. just paid a dividend (D) of $3.36, and its dividend is expected to grow at a constant rate (g) of 4.90% per year. If the required return (rs) on Super's stock is 12.25%, then the intrinsic, or theoretical market, value of Super's shares is per share. Which of the following statements is true about the constant growth model? O The constant growth model implies that dividend growth remains constant from now to infinity. O The constant growth model implies that dividends remain constant from now to a certain terminal year. Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.: per share. • If Super's stock is in equilibrium, the current expected dividend yield on the stock will be • Super's expected stock price one year from today will be per share. • If Super's stock is in equilibrium, the current expected capital gains yield on Super's stock will be per share.

2nd drop down options: 5.13%, 7.02%, 7.70%, 7.35%

3rd drop down options: $47.89, $30.12, $50.20, $45.71

4th drop down options: 104.82%, 4.82%, 5.78%, 4.34%

Answer 1

rate positively ..

Ans a)

Intrinsic value = Expectd dividend next year/(required rate - growth rate)

Expected dividend next year = 3.36*104.9%=

3.52

Therefore, Intrinsic value =

3.52/(12.25%-4.9%)

47.89

Ans =

47.89

Ans b)

Correct answer is option: The constant growth model implies that the dividend growth remains constant from now to infinity.

Ans c)

Expected dividend yield =

dividend next year/Price today

3.52/47.89

7.35%

Ans d)

Price 1 year from today = Price today*(1+growth rate)

47.89*(1+4.9%)

50.2

Ans =

50.20

Ans e)

Capital gain yield = (Price 1 year from now -Price today)/Price today

(50.2-47.89)/47.89

4.82%