Value at year 1 = Year 2 dividend / required rate - growth rate
Value at year 1 = 1.1 / 0.089 - 0.032
Value at year 1 = 1.1 / 0.057
Value at year 1 = 19.298246
Price Today = Future value / (1 +r)n
Price Today = 19.298246 /(1+ 0.089)
Price Today = $17.72
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash...
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1.20 per share, paid 4 years from now, growing by 3.2% per year. If GE's equity cost of capital is 8.7%, estimate the value of GE's shares today. The price today is $ - (Round to the nearest cent.)
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1.25 per share, paid 3 years from now, growing by 3.4% per year. If GE's equity cost of capital is 8.6%, estimate the value of GE's shares today. The price today is $ . (Round to the nearest cent.)
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1 per share, paid 3 years from now, growing by 3% per year. If GE's equity cost of capital is 9%, estimate the value of GE's shares today.
9.3 Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income (EBIT(1 - 1)] will be $410 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $110 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its...
Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows: Market value of company FCF (1+WACC) + FCF (1+WACC)...