ZuoTi.Pro
Question

ABC Company anticipates constant 4% growth in a market that expects 6% on investments. ABC currently...

ABC Company anticipates constant 4% growth in a market that expects 6% on investments. ABC currently sells for $89.00 per share. What would you expect their next dividend to be?

$4.16

$3.75

$3.19

$2.00

$1.78

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

Homework Answers

Answer #1

P0 = D1 / (rs - g)

D1 = P0 * (rs - g)

D1 = $89.00 * (0.06 - 0.04)

D1 = $1.78

0 0
Add a comment
Know the answer?
Add Answer to:
ABC Company anticipates constant 4% growth in a market that expects 6% on investments. ABC currently...
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

  • Nonconstant Growth Valuation A company currently pays a dividend of $3.75 per share (D0 = $3.75)....

    Nonconstant Growth Valuation A company currently pays a dividend of $3.75 per share (D0 = $3.75). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.95, the risk-free rate is 4%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations....

  • ABC Company growth rate

     ABC Company operates 18 brands. The dividend yield trailing twelve months is 0.784%, and it’s current market price per share is USD $50.89. The company group 's year to date return is -25.89%.  datePrice per share (USD $)Dividend per share (USD $)2019 Dec68.871.182018 Dec56.821.12952017 Dec67.171.02922016 Dec50.241.08842015 Dec50.651.04882014 Dec53.080.9735(a)Calculate according to the Constant Growth Model, the ABC Company's growth rate using the provided historical data(b)Suppose the company is expected to grow at the rate calculated in (a) for 3 more years,...

  • 7. Which of the following is an assumption of the dividend growth model? a. The current...

    7. Which of the following is an assumption of the dividend growth model? a. The current dividend divided by 1+g equals the next dividend. b. G must be greater than R. c. The stock must pay dividends. d. Both price and dividend will grow at Rindefinitely e. The price and dividend will increase gradually over the years. 8. A stock with a dividend yield of 5% and a total yield of 11% a. Must be growing at 4%. b. Must...

  • Gillette's most recent annual dividend was $8 per share. The company expects the growth of its...

    Gillette's most recent annual dividend was $8 per share. The company expects the growth of its dividends to be stable at 3% per year going forward. a) If investors require a 9% return, what is the current value of Gillette's stock? (round to nearest cent) b) If the stock currently trades at $116.57 per share, what is the dividend growth rate investors expect? (round to nearest percent)       Hint: When the constant-growth formula is solved for the growth variable, it...

  • Constant growth valuation Holtzman Clothiers' stock currently sells for $37 a share. It just paid a...

    Constant growth valuation Holtzman Clothiers' stock currently sells for $37 a share. It just paid a dividend of $3.75 a share (i.e., D0 = $3.75). The dividend is expected to grow at a constant rate of 6% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answers to two decimal places. Do not round your intermediate calculations. %

  • CONSTANT GROWTH VALUATION Holtzman Clothiers's stock currently sells for $29 a share. It just paid a...

    CONSTANT GROWTH VALUATION Holtzman Clothiers's stock currently sells for $29 a share. It just paid a dividend of $3.75 a share (i.e., D0 = $3.75). The dividend is expected to grow at a constant rate of 4% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations. %

  • ABC Company just paid out a dividend of $2 and expects this dividend to grow indefinitely...

    ABC Company just paid out a dividend of $2 and expects this dividend to grow indefinitely at a rate of g% per year. ABC has 100,000 shares outstanding with a current market price of $26 per share. ABC’s beta is 1.5, the return on the market is 9%, and the risk-free rate is 3%. Calculate the growth rate “g” so that the market is in equilibrium  (i.e., the CAPM-based return on ABC shares equals the Dividend-Growth-Model based return).

  • 6. Constant growth stocks Aa Aa E Consider the case of Urban Drapers Inc.: Urban Drapers...

    6. Constant growth stocks Aa Aa E Consider the case of Urban Drapers Inc.: Urban Drapers Inc., a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $4.16 per share every year to its shareholders. In its most recent annual report, the company informed investors that it expects to maintain its constant dividend into the foreseeable future and that dividends are not...

  • Rohr Inc.’s common stock currently sells for $64.00 per share, the company expects to earn $7.80...

    Rohr Inc.’s common stock currently sells for $64.00 per share, the company expects to earn $7.80 per share next year, its expected payout ratio is 55%, and its expected constant growth rate is 4.30%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings?

  • 7. Which of the following is an assumption of the dividend growth model? a. The current...

    7. Which of the following is an assumption of the dividend growth model? a. The current dividend divided by 1+g equals the next dividend. b. G must be greater than R. c. The stock must pay dividends. d. Both price and dividend will grow at Rindefinitely e. The price and dividend will increase gradually over the years. 8. A stock with a dividend yield of 5% and a total yield of 11% a. Must be growing at 4%. b. Must...

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