ZuoTi.Pro
Question

3. Phoenix produces dividends in four consecutive years of 0.32, 0.62, 0.82, and 0.92 respectively. The...

3. Phoenix produces dividends in four consecutive years of 0.32, 0.62, 0.82, and 0.92 respectively. The dividend in year five is estimated to be 1.05 and should grow in perpetuity at 3% thereafter. Given a discount rate of 10%, what is the price of the stock today?

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

Homework Answers

Answer #1

Value after year 5=(D5*Growth rate)/(Discount rate-Growth rate)

=(1.05*1.03)/(0.1-0.03)=$15.45

Hence current price of the stock=Future dividends*Present value of discounting factor(10%,time period)

=0.32/1.1+0.62/1.1^2+0.82/1.1^3+0.92/1.1^4+1.05/1.1^5+15.45/1.1^5

which is equal to

$12.29(Approx)

0 0
Add a comment
Know the answer?
Add Answer to:
3. Phoenix produces dividends in four consecutive years of 0.32, 0.62, 0.82, and 0.92 respectively. The...
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

  • Phoenix industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. T...

    Phoenix industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another two years (the dividend in year 2 will be $2 and the dividend in year 3 will be $3). After the third year (in which dividends are $3 per share) dividend growth is...

  • A stock will pay dividends of $1.20 four years from today, $1.50 five years from today,...

    A stock will pay dividends of $1.20 four years from today, $1.50 five years from today, and $1.90 six years from today. There will be no dividend payments prior to year 4. After year 6, the growth rate in dividends per year is expected to be 6% forever. The required return on the stock is 11%. P4, the price of the stock 4 years from now, should be $_______. * DO NOT ROUND INTERMEDIATE VALUES, NO CREDIT WILL BE GIVEN...

  • CoronaV Corp. just paid $3 dividends, it was $2.15 four years ago. The dividends should continue...

    CoronaV Corp. just paid $3 dividends, it was $2.15 four years ago. The dividends should continue to grow at the same rate to infinity. How much is their stock price given that investors require 12% returns? (Hint: Use 2 decimals for the dividend growth rate.) Question 1 options: $34.69 $53.16 $128.33 $98.51

  • Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today,...

    Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $3 per share) dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's...

  • Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today,...

    Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $3 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $5 per share) dividend growth is expected to settle down to a more moderate long- term growth rate of 6%. If the firm's...

  • Colgate-Palmolive Company has just paid an annual dividend of $ 1.72 . Analysts are predicting dividends...

    Colgate-Palmolive Company has just paid an annual dividend of $ 1.72 . Analysts are predicting dividends to grow by $ 0.13 per year over the next five years. After​ then, Colgate's earnings are expected to grow 5.1 % per​ year, and its dividend payout rate will remain constant. If​ Colgate's equity cost of capital is 8.6 % per​ year, what price does the​ dividend-discount model predict Colgate stock should sell for​ today? The price per share is ?

  • A stock is expected to pay the following dividends: $1.1 four years from now, $1.4 five...

    A stock is expected to pay the following dividends: $1.1 four years from now, $1.4 five years from now, and $1.9 six years from now, followed by growth in the dividend of 8% per year forever after that point. There will be no dividends prior to year 4. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________.

  • Grouper Mechanical Inc.’s first dividend of $3.4 per share is expected to be paid six years...

    Grouper Mechanical Inc.’s first dividend of $3.4 per share is expected to be paid six years from today. From then on, dividends will grow by 10 percent per year for five years. After five years, the growth rate will then slow to 5 percent per year in perpetuity. Assume that Grouper’s required rate of return is 16 percent. What is the price of a share of Grouper Mechanical today? (Round present value factor calculations to 5 decimal places, e.g. 1.15612....

  • The company AT&T’s current stock price is $33.79, and yesterday it paid a dividend of $1.85...

    The company AT&T’s current stock price is $33.79, and yesterday it paid a dividend of $1.85 per share. Analysts expect the dividend to grow at an 8% rate for the next three years (i.e. the next three dividends) due to the continued market growth of smartphones and increased usage of data services. Beginning with the dividend in year 4, analysts expect AT&T’s dividend growth rate to level off to 3% in perpetuity as these two revenue streams mature and data...

  • A corporation will pay a $1 dividend in one year, $2.00 in two years and $3...

    A corporation will pay a $1 dividend in one year, $2.00 in two years and $3 in threee years. After that, dividends are expected to grow by 49% per year. The required rate of return is 9% a. What will be the price of the company's stock two years from now? b. What should be the price of the stock today? 1.

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