Answer:
Expected Dividend, D1 = $3.25
Expected Price, P1 = $51.25
Required Return, rs = 11.00%
Current Price, P0 = (D1 + P1) / (1 + rs)
Current Price, P0 = ($3.25 + $51.25) / (1 + 0.11)
Current Price, P0 = $54.50 / 1.11
Current Price, P0 = $49.10
The current value of the stock is $49.10
Problem 8-15 (similar to) Question Help (Common stock valuation) Sanford common stock is expected to pay...
(Common stock valuation) Sanford common stock is expected to pay $1.501.50 in dividends next year, and the market price is projected to be $52.2552.25 per share by year-end. If investors require a rate of return of 1313 percent, what is the current value of the stock?
Bookmatch 8-14 (book/static) Question Help (Measuring growth) Given that a firm's return on equity is 18 percent and management plans to retain 40 percent of earnings for investment purposes, what will be the firm's growth rate? The firm's growth rate will be 96. (Round to two decimal places.) (Common stock valuation) Sanford common stock is expected to pay $1.85 in dividends next year, and the market price is projected to be $51.35 per share by year-end. If investors require a...
P10-5 (similar to) Question Help (Common stock valuation) The common stock of NCP paid $1.37 in dividends last year. Dividends are expected to grow at an annual rate of 5.00 percent for an indefinite number of years. a. If your required rate of return is 7.40 percent, what is the value of the stock for you? b. Should you make the investment? a. If your required rate of return is 7.40 percent, the value of the stock for you is...
P10-7 (similar to) Question Help (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $28. Dividends of $3.33 per share were paid last year, return on equity is 24 percent, and its retention rate is 24 percent. a. What is the value of the stock to you, given a required rate of return of 17 percent? b. Should you purchase this stock? a. Given a required rate of return of 17 percent, the value...
please show work and help with all three questions (Related to Checkpoint 10.1) (Common stock valuation) Header Motor, Inc., paid a $3.43 dividend last year. At a constant growth rate of 3 percent, what is the value of the common stock if the investors require a 8 percent rate of retum? $(Round to the nearest cent) The value of the common stock is (Common stock valuation) Gilland Motor, Inc., paid a $4.08 dividend last year. If Gilliland's return on equity...
(Common stock valuation) Mosser Corporation common stock paid $2.28 in dividends last year and is expected to grow indefinitely at an annual 5 percent rate. What is the value of the stock if you require a return of 12 percent? The value of the Mosser Corporation common stock is $ . (Round to the nearest cent.)
(Common stock valuation) Mosser Corporation common stock paid $1.79 in dividends last year and is expected to grow indefinitely at an annual 3 percent rate. What is the value of the stock if you require a return of 14 percent? The value of the Mosser Corporation common stock is (Round to the nearest cent.)
P10-12 (similar to) Question Help (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions • the investor's required rate of return is 12 percent, • the expected level of earnings at the end of this year (E) is $8, • the firm follows a policy of retaining 40 percent of its earnings, • the return on equity (ROE) is 12 percent,...
P10-12 (similar to) 3 Question Help (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 14 percent, • the expected level of earnings at the end of this year (E1) is $7, • the firm follows a policy of retaining 20 percent of its earnings, . the return on equity (ROE) is 13...
(Common stock valuation) The common stock of NCP paid $1.25 in dividends last year. Dividends are expected to grow at an annual rate of 5.90 percent for an indefinite number of years. a. If NCP's current market price is $24.97 per share, what is the stock's expected rate of return? b. If your required rate of return is 7.9 percent, what is the value of the stock for you? c. Should you make the investment? a. If NCP's current market...