4. You have a stock which pays a $1.45 dividend which is expected to grow at...

Question

Question

4. You have a stock which pays a $1.45 dividend which is expected to grow at...

4. You have a stock which pays a $1.45 dividend which is expected to grow at 15% for the next five years, then at a constant 6% into the future, the discount rate is 11%. (Round Up, Two Decimals)

Answer is a. $44.77

Can you help me get to this answer?

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

D0 = $1.45

D1 = $1.45 * 1.15 = $1.6675

D2 = $1.6675*1.15 = $1.91763

D3 = $1.91763 *1.15 = $2.20527

D4 = $2.20527*1.15 = $2.53606

D5 = $2.53606 *1.15 = $2.91647

Terminal value = $2.91647 *1.06 / (0.11 - 0.06) = $61.8291

Present value = [$1.6675 / (1.11)¹] + [$1.91763 / (1.11)²] +[$2.20527/ (1.11)³] + [$2.53606 / (1.11)⁴] + [$2.91647 / (1.11)⁵] + [$61.8291 / (1.11)⁵]

Present value = $44.77

So Stock price = $44.77

Add a comment

Answer 2

Similar Homework Help Questions

Final Exam questions and I'm not sure how to solve them. Please have step by step!...

Final Exam questions and I'm not sure how to solve them. Please have step by step! Stock - Top Hat Questions 1. ABC Company is set to pay a $2.50 preferred dividend in perpetuity and the required rate of return is 10%. What would be the expected value of the stock using this method? (Round Up, No Decimal) a. $25 2. ABC Company is set to pay a $1.45 dividend during the next period and the required rate of return...
The dividend for Should I, Inc., is currently $1.45 per share. It is expected to grow...

The dividend for Should I, Inc., is currently $1.45 per share. It is expected to grow at 16 percent next year and then decline linearly to a 4 percent perpetual rate in four years. If you require a 11 percent return on the stock, what is the most you would pay per share? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
1. A stock just paid a dividend of $1.58. The dividend is expected to grow at...

1. A stock just paid a dividend of $1.58. The dividend is expected to grow at 20.65% for five years and then grow at 4.73% thereafter. The required return on the stock is 11.20%. What is the value of the stock? Round to 2 decimal places. 2. A stock just paid a dividend of $1.58. The dividend is expected to grow at 25.17% for two years and then grow at 4.56% thereafter. The required return on the stock is 11.83%....

A stock just paid a dividend of $1.15. The dividend is expected to grow at 27.42% for five years and then grow at 4.85%...

A stock just paid a dividend of $1.15. The dividend is expected to grow at 27.42% for five years and then grow at 4.85% thereafter. The required return on the stock is 14.60%. What is the value of the stock? Answer format: Currency: Round to: 2 decimal places. The risk-free rate is 3.58% and the market risk premium is 7.47%. A stock with a β of 0.82 just paid a dividend of $2.61. The dividend is expected to grow at...
Mitts Cosmetics Co.'s stock price is $52.65, and it recently paid a $1.50 dividend. This dividend is expected to grow by...

Mitts Cosmetics Co.'s stock price is $52.65, and it recently paid a $1.50 dividend. This dividend is expected to grow by 24% for the next 3 years, then grow forever at a constant rate, g; and rs = 11%. At what constant rate is the stock expected to grow after Year 3? Round your answer to two decimal places. %
A stock just paid a dividend of $1.00. The dividend is expected to grow at 20.16%...

A stock just paid a dividend of $1.00. The dividend is expected to grow at 20.16% for three years and then grow at 3.34% thereafter. The required return on the stock is 13.82%. What is the value of the stock? Answer format: Currency: Round to: 2 decimal places. A stock just paid a dividend of $1.18. The dividend is expected to grow at 28.71% for five years and then grow at 3.19% thereafter. The required return on the stock is...

A firm pays a current dividend of $1, which is expected to grow at a rate...

A firm pays a current dividend of $1, which is expected to grow at a rate of 9% indefinitely. If the current value of the firm's shares is $109, what is the required return applicable to the investment based on the constant-growth dividend discount model (DDM)? (Do not round intermediate calculations.) Reguired rate of retum 315
A stock just paid a dividend of $1.06. The dividend is expected to grow at 26.40% for three years and then grow at 3.63%...

A stock just paid a dividend of $1.06. The dividend is expected to grow at 26.40% for three years and then grow at 3.63% thereafter. The required return on the stock is 11.09%. What is the value of the stock? A stock just paid a dividend of $1.13. The dividend is expected to grow at 21.57% for five years and then grow at 3.01% thereafter. The required return on the stock is 13.42%. What is the value of the stock?...
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $2.75 yesterday. Bahnsen's dividend is expected to grow at 8% per year for the next 3 years. If...

Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $2.75 yesterday. Bahnsen's dividend is expected to grow at 8% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 11%. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that D0...

JBK, Inc. normally pays an annual dividend. The last such dividend paid was $2.50, all future dividends are expected to...

JBK, Inc. normally pays an annual dividend. The last such dividend paid was $2.50, all future dividends are expected to grow at 5 percent, and the firm faces a required rate of return on equity of 11 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $17 per share that is not expected to affect any other future dividends, what should the stock price be? (Do not round intermediate calculations and round your...

4. You have a stock which pays a $1.45 dividend which is expected to grow at...

Homework Answers

Add Answer to:
4. You have a stock which pays a $1.45 dividend which is expected to grow at...

Post as a guest

Earn Coins

Final Exam questions and I'm not sure how to solve them. Please have step by step!...

The dividend for Should I, Inc., is currently $1.45 per share. It is expected to grow...

1. A stock just paid a dividend of $1.58. The dividend is expected to grow at...

A stock just paid a dividend of $1.15. The dividend is expected to grow at 27.42% for five years and then grow at 4.85%...

Mitts Cosmetics Co.'s stock price is $52.65, and it recently paid a $1.50 dividend. This dividend is expected to grow by...

A stock just paid a dividend of $1.00. The dividend is expected to grow at 20.16%...

A firm pays a current dividend of $1, which is expected to grow at a rate...

A stock just paid a dividend of $1.06. The dividend is expected to grow at 26.40% for three years and then grow at 3.63%...

Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $2.75 yesterday. Bahnsen's dividend is expected to grow at 8% per year for the next 3 years. If...

JBK, Inc. normally pays an annual dividend. The last such dividend paid was $2.50, all future dividends are expected to...

4. You have a stock which pays a $1.45 dividend which is expected to grow at...

Homework Answers

Add Answer to: 4. You have a stock which pays a $1.45 dividend which is expected to grow at...

Post as a guest

Earn Coins

Add Answer to:
4. You have a stock which pays a $1.45 dividend which is expected to grow at...