19]
Price of stock = next year dividend / (required return - constant dividend growth rate)
next year dividend = next year earnings * (1 - retention ratio)
next year dividend = $3.00 * (1 - 40%) = $1.80.
Price of stock = $1.80 / (15% - 10%) = $36.00
19. XYZ Company has expected earnings of $3.00 for next year and usually retains 40 percent...
(Preferred stockholder expected return) You own 150 shares of Dalton Resources preferred stock, which currently sells for $47.35 per share and pays annual dividends of $4.75 per share. a. What is your expected return? 10.03 % b. If you require a return of 7 percent, given the current price, should you sell or buy more stock? If you require a return of percent, the value of the stock for you is $ 67.86. (round to the nearest cent.) Because the...
XYZ Inc. has expected earnings over the next year of $2/share (E1 = 2). The company is expected to maintain an earnings retention rate of 40%, i.e., 60% of earnings are expected to be paid out as dividends every year. The company has a beta of 1.5, the risk-free rate is 4%, and the market risk premium is also 4%. a. If the growth rate in earnings is expected to be 5% in perpetuity i. What is the value of...
Preferred stockholder expected return) You own 100 shares of Shapard Resources preferred stock, which currently sells for $37 per share and pays annual dividends of $5.25 per share. a. What is your expected return? b. If you require a return of 11 percent, given the current price, should you sell or buy more stock? a. Your expected return is nothing percent. (Round to two decimal places.)b. If you require a return of 11 percent, the value of the stock for...
(Preferred stockholder expected return) You own 150 shares of Dalton Resources preferred stock, which currently sells for $ 46.55 per share and pays annual dividends of $ 2.75 per share. a. What is your expected return? b. If you require a return of 6 percent, given the current price, should you sell or buy more stock? a. Your expected return is ____ percent.(Round to two decimal places.) b. If you require a return of 6 percent, the value of the...
A company's stock has a beta of 1.56, expected return of 9.5%, current market price of $20, and intrinsic value of $30. Which of the following is true? The stock has no idiosyncratic risk. The stock is undervalued. The stock is fairly valued. There is not enough information to make a decision. The stock is overvalued.
Your company paid a dividend of $3.00 last year (DO =3.0). The growth rate is expected to be 10 percent for first year, 8 percent the second year, then 7 percent for the third year, and then the growth rate is expected to be a constant 6 percent thereafter. The required rate of return on equity (rs) is 10 percent. What is the company's current stock price (i.e., intrinsic value)? 0 $79.94 O $84.74 0 $73.32 O $67.47 $101.06
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Problem 7-20 Nonconstant Growth Stock Valuation Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, RT is expected to experience a 14% annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and RT's growth rate will slow to 5% per year indefinitely. Stockholders require a return of 12% on RT's stock....
Problem 7-20 Nonconstant Growth Stock Valuation Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, RT is expected to experience a 14% annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and RT's growth rate will slow to 7% per year indefinitely. Stockholders require a return of 12% on RT's stock....
The common stock of NCP paid $1.42 in dividends last year. Dividends are expected to grow at an annual rate of 5.3 percent for an indefinite number of years. a. If your required rate of return is 7.6 percent, what is the value of the stock for you? b. Should you make the investment? ---------------------------------------------------------------------------------------------------------------------------------------------------------------- a. If your required rate of return is 7.6 percent, the value of the stock for you is $________ (Round to the nearest cent.) b....