X company focuses in the forthcoming 3 years on growth, therefore plans to pay low dividends at EUR100 per share. From year 4, however, dividend is planning to grow by 10% annually ad infinitum. Expected return on shares(opportunity cost of capital) is 20%.
A. If a shareholder plans to sell their stock at the end of the 3rd year, what will be the share price in that moment, based on currently available information.
B. What is the current fair price of the stock.
X company focuses in the forthcoming 3 years on growth, therefore plans to pay low dividends...
The Peterman Company does not currently pay dividends. However, investors expect that, in 6 years, Peterman will pay its first dividend of $1.51 per share and will continue to grow at 10% per year forever. If investors require a 13% annual return on the stock, what is the current price? The current price of the stock is $ . (Round to the nearest cent.)
Maynard Steel plans to pay a dividend of $ 2.87 this year. The company has an expected earnings growth rate of 4.2 % per year and an equity cost of capital of 10.8 %. a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $ 0.91 this year and use the remaining $ 1.96 per...
Maynard Steel plans to pay a dividend of $3.02 this year. The company has an expected earnings growth rate of 3.5% per year and an equity cost of capital of 10.4%. a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $1.04 this year and use the remaining $1.98 per share to repurchase shares. If...
Maynard Steel plans to pay a dividend of $3.00 this year. The company has an expected earnings growth rate of 4.0% per year and an equity cost of capital of 10.0%. a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $1.00 this year and use the remaining $2.00 per share to repurchase shares. If...
Maynard Steel plans to pay a dividend of $3.17 this year. The company has an expected earnings growth rate of 3.8% per year and an equity cost of capital of 10,2% a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares estimate Maynard's share price b. Suppose Maynard decides to pay a dividend of $0.96 this year and use the remaining 82.21 per share to repurchase shares Maynard's...
3. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: ſo = Dale (rs - g) Which of the following statements is true? o Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth. O Increasing dividends will always increase the stock price. O Increasing...
Maynard Steel plans to pay a dividend of $ 2.92 this year. The company has an expected earnings growth rate of 3.6 % per year and an equity cost of capital of 9.2 %. a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. (Round to the nearest cent.) b. Suppose Maynard decides to pay a dividend of $ 0.94 this year and use...
Hayworth Industries does not currently pay dividends. However, investors expect that, in 4 years, Hayworth will pay its first dividend of $ 2.08 per share and will continue to grow at 12% per year forever. If investors require a 13% annual return on the stock, what is the current price?
9. Stock repurchases Companies with excess cash often employ share repurchase plans in place of or along with cash dividends. Share repurchase plans can help investors liquidate their holdings by selling their stock to the issuing company and earning from capital gains. Consider the case of St. Sebastian Inc.:St. Sebastian Inc. has forecasted a net income of $5,700,000 for this year. Its common stock currently trades at $19 per share, and the company currently has 830,000 shares of common stock outstanding. It...