Question

The Bellingham Bay Company is planning on increasing its annual dividend by 20 percent a year...

The Bellingham Bay Company is planning on increasing its annual dividend by 20 percent a year for the next 2 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share of this stock if the required rate of return is 8 percent?

Group of answer choices

$51.84

$50.40

$45.56

$43.20

0 0
Add a comment Improve this question Transcribed image text
Answer #1

D1=(1*1.2)=1.2

D2=(1.2*1.2)=1.44

Value after year 2=(D2*Growth rate)/(Required return-Growth rate)

=(1.44*1.05)/(0.08-0.05)

=50.4

Hence current value=Future dividend and value*Present value of discounting factor(rate%,time period)

=1.2/1.08+1.44/1.08^2+50.4/1.08^2

=$45.56(Approx)

Add a comment
Know the answer?
Add Answer to:
The Bellingham Bay Company is planning on increasing its annual dividend by 20 percent a year...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • The Bellingham Bay Company is planning on increasing its annual dividend by 20 percent a year...

    The Bellingham Bay Company is planning on increasing its annual dividend by 20 percent a year for the next 2 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share of this stock if the required rate of return is 8 percent?

  • The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual div...

    The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 19 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $2.60 per share. What is the current value of one share of this stock if the required rate of return is 8.10 percent? $105.30 $90.41 $77.11...

  • OMG Corporation just paid a $2.90 annual dividend on each share. It is planning on increasing...

    OMG Corporation just paid a $2.90 annual dividend on each share. It is planning on increasing its dividend by 15 percent a year for the next 4 years. The corporation will then decrease the growth rate to a rate of 6 percent per year, and keep it that way indefinitely. The required rate of return is 8.40 percent. Calculate the current value of one share of this corporation's stock. Multiple Choice $226.92 $162.24 $178.62 $224.02 $175.72

  • Combined Communications is a new firm in a rapidly growing industry. The company is planning on...

    Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $1.40 per share. What is the current value of one share of this stock if the required rate of return is 8.25 percent?

  • Combined Communications is a new firm in a rapidly growing industry. The company is planning on...

    Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 10 percent a year for the next 3 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $1 per share. What is the current value of one share of this stock if the required rate of return is 15% percent?

  • Combined Communications is a new firm in a rapidly growing industry. The company is planning on...

    Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $1.30 per share. What is the current value of one share of this stock if the required rate of return is 9.50 percent? $70.61 $60.88 $65.42 $64.46 $56.60

  • Combined Communications is a new firm in a rapidly growing industry. The company is planning on...

    Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20 percent a year for the next 4 years and then decreasing the growth rate to 4 percent per year. The company just paid its annual dividend in the amount of $1.30 per share. What is the current value of one share of this stock if the required rate of return is 9.25 percent? O $36.69 $44.10 O $40.96...

  • Global Tek is a new firm in a rapidly growing industry. The company is planning on...

    Global Tek is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 percent a year for the next four years and then decreasing the growth rate to 3.5 percent per year. The company just paid its annual dividend in the amount of $.20 per share. What is the current value of one share of this stock if the required rate of return is 15.5 percent? Please show all steps.. I'm...

  • Bell Weather Industries just paid a $3.00 per share dividend. The company is planning on increasing...

    Bell Weather Industries just paid a $3.00 per share dividend. The company is planning on increasing its annual dividend by 10% a year for two years and then the annual growth rate will be 5% per year thereafter. What is the current value of one share of stock if the required rate of return is 8%. Show all work.

  • The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on incr...

    The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 16 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $1.60 per share. What is the current value of one share of this stock if the required rate of return is 7.10 percent? Multiple Choice $220.03...

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