ZuoTi.Pro
Question

XYZ Corporation has a dividend payout rate of 25%. The firm's current earnings of $18.50 per...

XYZ Corporation has a dividend payout rate of 25%. The firm's current earnings of $18.50 per share are expected to grow at an annual rate of 5%, and its cost of equity capital is 10%. What is the firm's expected "price" per share?

a.

$19.425
b.

$25.90
c.

$46.25
d.

$77.70
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Dividend0 = 18.50 * 0.25 = 4.625

Div1 = 4.625 * (1 + 0.05) = 4.85625

Constant growth Dividend discount model

Price = Div1/(r - g)

Price = 4.85625/(0.1 - 0.05)

Price = $97.125

Can you please upvote? Thank You :-)

0 0
Add a comment
Know the answer?
Add Answer to:
XYZ Corporation has a dividend payout rate of 25%. The firm's current earnings of $18.50 per...
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

  • You have estimated the following earnings and payout rates for XYZ Corporation for the next five...

    You have estimated the following earnings and payout rates for XYZ Corporation for the next five years (see table below). If XYZ retains earnings they can be invested in new projects with an expected return of 25.13% per year. You anticipate that after year 5 XYZ will payout 77% of its earnings in perpetuity. Any earnings that are not retained will be paid out as dividends. Assume XYZ does not repurchase any shares and does not conduct any stock splits....

  • CH7 1. Laurel Enterprises expects earnings next year of $3.84 per share and has a 50%...

    CH7 1. Laurel Enterprises expects earnings next year of $3.84 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 1 1%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 5.5% per year If its next dividend is due in one year, what do you estimate the firm's current stock price to be? 2, Laurel Enterprises expects earnings...

  • 1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout...

    1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout ratio of 40%. The next annual earnings are expected to be $3 per share (that is, EPS in year 1 is $3.00). The firm's required return on the stock is 17%. The value of the stock today is $____________. 2. Company A  just paid a $1.00 dividend per share and its future dividends are expected to grow at an annual rate of 6% for the...

  • 1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout...

    1. ABC Corp. has an ROE (return on reinvested earnings) of 20% and a dividend payout ratio of 40%. The next annual earnings are expected to be $3 per share (that is, EPS in year 1 is $3.00). The firm's required return on the stock is 17%. The value of the stock today is $____________. 2. Company A  just paid a $1.00 dividend per share and its future dividends are expected to grow at an annual rate of 6% for the...

  • Laurel Enterprises expects earnings next year of $4.29 per share and has a 50 % retention rate

    Laurel Enterprises expects earnings next year of $4.29 per share and has a 50 % retention rate, which it plans to keep constant. Its equity cost of capital is 9 %, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 4.5 % per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be? The current stock price will be...

  • Laurel Enterprises expects earnings next year of ​$3.94 per share and has a 30% retention​ rate,...

    Laurel Enterprises expects earnings next year of ​$3.94 per share and has a 30% retention​ rate, which it plans to keep constant. Its equity cost of capital is 9%​, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 2.7 % per year. If its next dividend is due in one​ year, what do you estimate the​ firm's current stock price to​ be?

  • Laurel Enterpnses expects earnings next year of S4.21 per share and has a 40% retention rate,...

    Laurel Enterpnses expects earnings next year of S4.21 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment. If its earnings are expected to grow forever at a rate of 3% per year, what do you estimate the firm's current stock price to be? (Hint: its next dividend is due in one year.) The current stock price will be $U...

  • Laurel Enterprises expects earnings next year of​$3.99 per share and has a 30% retention​ rate, which...

    Laurel Enterprises expects earnings next year of​$3.99 per share and has a 30% retention​ rate, which it plans to keep constant. Its equity cost of capital is 11%​, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 3.3% per year. If its next dividend is due in one​ year, what do you estimate the​ firm's current stock price to​ be?

  • 12. Laurel Enterprises expects earnings next year of $3.51 per share and has a 50% retention​...

    12. Laurel Enterprises expects earnings next year of $3.51 per share and has a 50% retention​ rate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 4.5% per year. If its next dividend is due in one​ year, what do you estimate the​ firm's current stock price to​ be? The current stock price will be ​$____....

  • Laurel Enterprises expects earnings next year of ​$4.12 per share and has a 30 % retention​...

    Laurel Enterprises expects earnings next year of ​$4.12 per share and has a 30 % retention​ rate, which it plans to keep constant. Its equity cost of capital is 11 %​, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 3.3 % per year. If its next dividend is due in one​ year, what do you estimate the​ firm's current stock price to​ be?

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