7. Madonna Pen Corp. just paid a $1.50 per share dividend on its common stock. The...

Question

Question

Answer 1

Answer #1

Please provide rating.. Please find below the answer..

Intrinsic value can be computed using dividend growth model

As per dividend growth model price today = Expected dividend next year/(required rate - Growth rate)

Expected dividend next year = Current dividend * (1+ Growth rate)
Expected dividend next year =			=1.5*(1+6%)
Expected dividend next year =			1.59


Intrinsic value =			=1.59/(11%-6%)
Intrinsic value =			31.80

Answer 2

Similar Homework Help Questions

8. Ortiz Power Tools Co. recently paid a $0.80 per share dividend on its stock. The...

8. Ortiz Power Tools Co. recently paid a $0.80 per share dividend on its stock. The company expects to t is be able to increase its dividend by 20% in each of the next two years and then by an annual growth rate of 8% for the foreseeable future, what is the current price of the stock assuming the marke in equilibrium and a required rate of return of 12.5%? a. Compute the following dividend values. Supporting Calculation Di D2...
1. Polomi's common stock just paid a dividend of $1.31 per share. And the dividend is...

1. Polomi's common stock just paid a dividend of $1.31 per share. And the dividend is expected to grow at a rate of 6.00% every year. Investors require a rate of return of 12.80% on Polomi's stock. a. Calculate the intrinsic value of Polomi's stock? (Round your answer to 2 decimal places.) Intrinsic value $ b. What should be the price of Polomi's stock 1 year from now if market expect its current market price reflects its intrinsic value? (Round...
A matured company just paid a dividend of $6.49 per share yesterday. The company expects its...

A matured company just paid a dividend of $6.49 per share yesterday. The company expects its dividends to decline at a steady rate of 3.1 percent per year into the foreseeable future. Investors demand a rate of return of 8.8 percent of this company's stock. What should one share of the stock sell for today?

Bergman Corp. has paid an annual dividend of $2.00 per share over the past seven years,...

Bergman Corp. has paid an annual dividend of $2.00 per share over the past seven years, including the last payment this month. Investors expect a brighter future for Bergman and now expect Bergman's dividend payout to be $2.10 for the end of the year and for the foreseeable future. If the opportunity cost of capital is 12%, what is the intrinsic value of Bergman Corp.'s common stock? What happens to the intrinsic price of the stock if the market interest...
Mariota Corp. just paid a dividend of $3.90 per share on its stock. The dividend growth...

Mariota Corp. just paid a dividend of $3.90 per share on its stock. The dividend growth rate is expected to be 3.6 forever and investors require a return of 12.8 percent on this stock. What will the stock price be in 13 years?
Bergman Corp. has paid an annual dividend of $2.00 per share over the past seven years,...

Bergman Corp. has paid an annual dividend of $2.00 per share over the past seven years, including the last payment this month. Investors expect a brighter future for Bergman and now expect Bergman’s dividend payout to be $2.10 for the end of the year and for the foreseeable future. If the opportunity cost of capital is 12%, what is the intrinsic value of Bergman Corp.’s common stock? What happens to the intrinsic price of the stock if the market interest...

Mariota Corp. just paid a dividend of $4.25 per share on its stock. The dividend growth...

Mariota Corp. just paid a dividend of $4.25 per share on its stock. The dividend growth rate is expected to be 3.25 forever and investors require a return of 13.5 percent on this stock. What will the stock price be in 13 years? Multiple Choice $57.16 $12.51 $64.88 $49.26
Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share...

Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share dividend. The company is expected to increase its dividend by 20% per year for the next two years. After the second year, the dividend growth rate will be 5% per year for the next two years. After the 4th year, dividends are expected to grow at a constant rate of 3% into the foreseeable future. An analyst estimates that investors in the firm will require a 12% annual...
Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share...

Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share dividend. The company is expected to increase its dividend by 25% per year for the next two years. After the second year, the dividend growth rate will be 5% per year for the next two years. After the 4th year, dividends are expected to grow at a constant rate of 3% into the foreseeable future. An analyst estimates that investors in the firm will...

Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share...

Fowler and Woods Enterprises is a publicly traded company that just paid a $2.00 per share dividend. The company is expected to increase its dividend by 20% per year for the next two years. After the second year, the dividend growth rate will be 5% per year for the next two years. After the 4th year, dividends are expected to grow at a constant rate of 3% into the foreseeable future. An analyst estimates that investors in the firm will require a 12% annual...