Large, established firms usually pay regular dividends that grow at a stable rate, and they are very reluctant to cut their dividends. Why?
This is because the dividend policy of large, established firms is seen to be a signal regarding the company's prospects. A cut in dividend can be a negative signal for investors, who may perceive the cut in dividend to be indicative of poor performance in the future. Large, established firms are expected by investors to tide over business cycles, and one quarter or year of poor performance is not expected to last over the next few years or quarters. Thus, a cut in dividend indicates that the poor performance is not temporary, but could be longer than expected.
This is the reason large, established firms rarely cut dividend.
Large, established firms usually pay regular dividends that grow at a stable rate, and they are...
Miltmar corporation will pay a year-end dividends of $3, and dividends thereafter are expected to grow at the constant rate of 5% per year. the risk-free rate is 5%, and the expected return on the market portofolio is 10%. the stock has a beta of 0.85
A stock is expected to pay a dividend of $8.25. These dividends are expected to grow at a constant rate of 4%. What is the stock price if the required rate of return on the stock is 8%? A. $82.50 B. $169.32 C. $206.25 D. $214.50
Hudaverdi Ltd pay current dividends of $0.96 per share with these dividends expected to grow at a rate of 4.6% per year in perpetuity. Hudaverdi Ltd shares are currently trading at $7.47 per share. What is the cost of equity finance for Hudaverdi Ltd? Give your answer as a percentage per annum to 1 decimal place. Cost of equity = % pa
If a firm is expected to pay a dividend of $2 this year (div0) and they expect dividends to grow by 5% per years, what is the theoretical price of that firms stock according to the dividend discount model if you have a 10% required return?
Stock X will pay a dividend of $0.70 and is expected to grow at a rate of 24% between t = 1 and t = 2, after which it will continue to grow at a constant rate of 21%. The expected rate of return on the stock is 22%, what should be the stock price? Hint: Draw a time line with growth rates and dividends indicated. $61.53 $66.63 $71.72 $76.81 $63.24
Bodie Inc. expects that dividends will grow constantly at 0.06. It is expected to pay a diviend of $4.3 next year, and the market capitalization rate is 0.10. What is the intrinsic value of the company in four years (t4)? Assume the constant growth DDM. * Round your answer to TWO decimal places.
XYZ, Inc. is expected to pay a dividend of $1.33. The dividends are expected to grow at 7.74% each year forever. The required rate of return on the stock is 22.73%. What is today's price of the stock? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.
Multistage Growth A firm projects that dividends will grow at a rate of 10% per year for four years and then will grow at a rate of 4% per year forever. The stock's required return is 12% and the last annual dividend paid was $1.50. The most an investor should be willing to pay for this stock today is ______. (Watch your rounding, carry out dividends to four or more decimal places.) $23.88 $28.55 $27.22 $21.94 and explain
The last dividend paid by GM was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firms required return (rs) is 11% in Years 1 and 2 and then increases to 13% thereafter and (rs) remains at 13% indefinitely. What is the stocks current price?
Zebra Inc. will pay a dividend of $3 per share next year. Dividends are expected to grow at a rate of 8% until the end of year 3, and will grow at a constant rate of 3% thereafter. What is the current share price of the common stock if investors require a return of 12% on common stock?