New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend of $5.05 per share...

Question

Question

Answer 1

Answer #1

	Required rate=	11.60%
Year	Previous year dividend	Dividend growth rate	Dividend current year	Horizon value	Total Value	Discount factor	Discounted value
1	0	0.00%	0		0	1.116	0
2	0	0.00%	0		0	1.245456	0
3	0	0.00%	0		0	1.389928896	0
4	0	0.00%	0		0	1.551160648	0
5	0	0.00%	0		0	1.731095283	0
6	0	0.00%	0		0	1.931902336	0.00
7	0	0.00%	0		0	2.156003007	0
8	0	0.00%	0		0	2.406099356	0
9	0	0.00%	0		0	2.685206881	0
10	0	0.00%	5.05	67.204	72.254	2.996690879	24.11126
	Long term growth rate (given)=	3.80%			*Value of Stock =*	*Sum of discounted value =*	24.11



Where
Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 10 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

Please ask remaining parts seperately, questions are unrelated

Answer 2

Similar Homework Help Questions

New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend...

New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend of $4.85 per share exactly 6 years from today. After that, the dividends are expected to grow at 3.4 percent forever. If the required return is 11.2 percent, what is the price of the stock today?
9. Knightmare, Inc., will pay a dividend of $6.15, $9.05, and $12.25 per share for each...

9. Knightmare, Inc., will pay a dividend of $6.15, $9.05, and $12.25 per share for each of the next three years, respectively. The company will then close its doors. Investors require a return of 11.7 percent on the company's stock. What is the current stock price? 10. Brickhouse is expected to pay a dividend of $2.90 and $2.36 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.4 percent. What is...
Brickhouse is expected to pay a dividend of $3.35 and $2.54 over the next two years,...

Brickhouse is expected to pay a dividend of $3.35 and $2.54 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.3 percent. What is the stock price today if the required return is 11.7 percent?

Brickhouse is expected to pay a dividend of $3.65 and $2.66 over the next two years,...

Brickhouse is expected to pay a dividend of $3.65 and $2.66 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.3 percent. What is the stock price today if the required return is 12.3 percent? $34.63 $24.20 $29.56 $27.45 $32.13
Brickhouse is expected to pay a dividend of $3.45 and $2.58 over the next two years,...

Brickhouse is expected to pay a dividend of $3.45 and $2.58 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.1 percent. What is the stock price today if the required return is 11.9 percent? $37.46 $30.57 $35.07 $32.63 $27.49
Business Calculators Inc. will pay an annual dividend of $2.25 per share next year. The company...

Business Calculators Inc. will pay an annual dividend of $2.25 per share next year. The company just announced that future dividends will be increasing by 0.75 percent annually. How much are you willing to pay for one share of this stock if you require a rate of return of 12.25 percent? Multiple Choice

Chelsea Fashions is expected to pay an annual dividend of $1.26 a share next year. The...

Chelsea Fashions is expected to pay an annual dividend of $1.26 a share next year. The market price of the stock is $24.09 and the growth rate is 2.6 percent. What is the cost of equity? Multiple Choice 7.91 percent 9.77 percent 9.24 percent 7.54 percent 7.83 percent
General Importers announced that it will pay a dividend of $3.75 per share one year from...

General Importers announced that it will pay a dividend of $3.75 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 6 years. Then, 8 years from today, the company will begin paying an annual dividend of $1.85 forever. The required return is 11.6 percent. What is the price of the stock today?
This morning you purchased a stock that just paid an annual dividend of $1.70 per share.

This morning you purchased a stock that just paid an annual dividend of $1.70 per share. You require a return of 9.5 percent and the dividend will increase at an annual growth rate of 2.6 percent. If you sell this stock in three years, what will your capital gain be? Multiple Choice $2.31 $2.60 $2.02 $2.66 Fowler is expected to pay a dividend of $1.53 one year from today and $1.68 two years from today. The company has a dividend payout ratio of 45 percent and...

Problem1: The XYZ Co. just paid a dividend of $1.95 per share on its stock. The...

Problem1: The XYZ Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4% per year indefinitely. Assume investorsrequire a return of 10.5 % on the XYZ Co. stock. What will the price be in 3 years? Show yourwork/calculations Problem2: The ABCorp. paid an annual dividend of $1.37 a share last month. Today, the company announced that future dividends will be increasing by 2.8 percent annually. If...