Problem 8
a.
Gordon Dividend Model
386 =
Ke = 12.61%
Yes, return on equity is a good return relative, the return is higher than the returns of a Manufacturing Conglomerate and even higher from Venture Capital and Private Equity.
b.
The higher the discount rate, discounted cash flows will be lower. As Manufacturing Conglomerate has a lower discount rate, discounted cash flows will be higher than Venture Capital.
Problem 9
= 257.5
Price of Newton's Share is trading at 261 and fair price is calculated at 257.5, which is lower, therefore share is 'Overvalued'. Recommendation: Sell
PROBLEM a) DERIVE THE "COST OF EQUITY USING THE GORDON DIVIDEND MODEL FOR THE STOCK PRICE OF 1386...
45) Using the Constant Growth (Gordon) Model, what should be the current price of a stock if the next expected dividend is $5, the stock has a required rate of return of 20%, and a constant dividend growth rate of 6%? A) $19.23 B) $25.00 C) $35.71 D) $37.86
Calculate the cost of new common equity financing of stock Q using Gordon Model Round the answers to two decimal places in percentage form (Write the percentage sign in the "units" box) Last Year Dividend Growth Rate of Dividends Selling Price of Floatation Stock Costs Cost of Common Equity Stock $3.89 3% $71.64 $3.09
Calculate the cost of new common equity financing of stock Q using Gordon Model Round the answers to two decimal places in percentage form (Write the percentage sign in the "units" box) Last Year Dividend Growth Rate of Dividends Selling Price of Stock Floatation Costs Cost of Common Equity Stock Q $2.79 7% $79.17 $3.71 ?
When would it be important to AVOID using the Gordon growth model (also called the dividend discount model) to estimate the value of common stock in a future period? The required return on the stock is 5 percent and the expected dividend growth rate is 6 percent. There is an expectation that the dividend growth rate will continue indefinitely. The only reliable information available is the current dividend paid, the expected dividend growth rate, and the required return on common...
3. Use the Gordon growth model to estimate Microsoft’s current stock price. Assume next year’s dividend payment is $12.00, the appropriate discount rate is 6 percent, and the company’s profits are expected to grow by 2 percent annually.
Assume a Company X's stock price today and cost of equity is consistent with the dividend discount model for constant growth; HINT: Cost of Equity Dividend Yield + Capital Gain Yield. Use the information in the table below to answer problems 16-17. Any missing information will need to be solved for. TIME (Years) 0 NI 1,350.00 Dividends Shares Outstanding Book Value Price Per Share Return On Equity Cost of Equity Long Term Growth Dividends Per Share 135.00 $6,750.00 80.00 12.0%...
A share of stock that pays a current dividend of $2.94. The return on equity is 11.2% and total earnings for the past year is $6.29. Shareholders required rate of return is 12.6%. What is the price of this security?
Assume a Company X's stock price today and cost of equity is consistent with the dividend discount model for constant growth HINT: Cost of Equity Dividend Yield + Capital Gain Yield. Use the information in the table below to answer problems 16-17. Any missing information will need to be solved for TIME (Years) 0 Shares Outstanding Book Value Prike Per Share Return On Equity Cost of Equity Long Term Growth Dividends Per Share 135.00 $6,750.00 80.00 12.0% 16. Company X's...
Determine the price of the security: A share of stock that pays a current dividend of $2.94. The return on equity is 11.2% and total earnings for the past year is $6.29. Shareholders required rate of return is 12.6%.
How can i calculate the cost of equity using Security Market Line and Dividend Discount Model (DDM), the cost of debt, the market value weights, and the WACC to use your answer from Security Market Line in your calculation for the cost of equity? Please do not use excel Phillips Pharmaceuticals Limited (PPL) shares are publicly traded on the Toronto Stock Exchange. The common shares currently trade at a market price of $30.00 per share. PPL recently paid a dividend...