Moriband Corp. paid a dividend of $2.15 yesterday. The company's dividend is expected to grow at a steady rate of 5 perc...
Moriband Corp. paid a dividend of $2.15 yesterday. The company's dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Moriband require a rate of return of 15 percent, what should be the market price of Moriband stock?
X-Centric Energy Company has issued perpetual preferred stock with a stated (par) value of $100 and a dividend of 4.5 percent. If the required rate of return is 8.25 percent, what is the stock's current market price?
Homework Answers
1.Current price=D1/(Required return-Growth rate)
=(2.15*1.05)/(0.15-0.05)
=$22.575
2.Annual dividend=100*4.5%=4.5
Hence stock value=Annual dividend/required rate of return
=4.5/0.0825
=$54.55(Approx).
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