1. If a certain corporation just recently paid a dividend of $3.70, and the dividend is...

1. If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected to grow at 4% for a long time into the future, calculate the price of this company’s stock at required returns of 8%, 10% and 12%. Then using a 10% required return, calculate the price at growth rates of 2%, 5% and 8%. Discuss what you see in the behavior of the prices in response to changes in the growth rate and changes in the required return. Using the price you calculated with a 4% growth rate and a 10% required return, what would be the expected dividend and price five years from today?

Solutions

Expert Solution

jeff jeffy answered 3 months ago

Next > < Previous

Related Solutions

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected...

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected to grow at 4% for a long time into the future, calculate the price of this company’s stock at required returns of 8%, 10% and 12%. Then using a 10% required return, calculate the price at growth rates of 2%, 5% and 8%. Discuss what you see in the behavior of the prices in response to changes in the growth rate and changes in...

Last year, Wilderness Adventures paid an annual dividend of $3.70 per share. The firm recently announced...

Last year, Wilderness Adventures paid an annual dividend of $3.70 per share. The firm recently announced that it will increase its dividend by a constant 12.5 percent annually. What is one share of this stock worth today at a required rate of 17.8 percent? $78.05 $79.63 $78.54 $79.75 Excelor stock is expected to pay $2.80 per share as its next annual dividend. The firm has a policy of increasing the dividend by 10.0 percent annually. The stock has a market...

1. HF Corporation just paid a dividend of $4.00. The dividend is expected to grow by...

1. HF Corporation just paid a dividend of $4.00. The dividend is expected to grow by 8% this year, 6% in year two and 5% in year three. Beginning in year four, the dividend is expected to grow at a constant rate of 4%. With a required return of 10%, what is a share of this company’s stock worth today? 2. TP Company report FCF of $800,000 in the most recently completed year. FCF is expected to grow by 10%...

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is...

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 7% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

Recently, David Corporation has paid $3 dividend for each of the outstanding shares. The dividend is...

Recently, David Corporation has paid $3 dividend for each of the outstanding shares. The dividend is expected to be increased at 2% for the next three years, after which the dividend would be increased by 5% per year forever. If the required return of the share is at 10%, what is the value of a share currently?

Weston Corporation just paid a dividend of $4 a share (i.e., D0 = $4). The dividend...

Weston Corporation just paid a dividend of $4 a share (i.e., D0 = $4). The dividend is expected to grow 10% a year for the next 3 years and then at 3% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places. D1 = $ D2 = $ D3 = $ D4 = $ D5 = $

Contact Corporation just paid a dividend of $1.50 per share. The company expects that the dividend...

Contact Corporation just paid a dividend of $1.50 per share. The company expects that the dividend will grow at a rate of 10% for the next two years. After year two it is expected that the dividend will decline at a rate of 3% indefinitely. If the required return is 12%, what is the value of a share of stock?

Coral corporation just paid a dividend of $4.25 a share. The company will increase its dividend...

Coral corporation just paid a dividend of $4.25 a share. The company will increase its dividend by 20% next year and will then reduce its dividend growth rate by 5% a year (example year 2 dividend growth rate is 20% - 5% = 15%) until it reaches the industry average of 5 percent dividend growth after which the company will keep the constant growth rate of 5%. If the required rate of return on Coral corp stock is 11%, what...

Mature Conglomerate Corporation (MCC) just paid a dividend of $1.35 per share, and that dividend is...

Mature Conglomerate Corporation (MCC) just paid a dividend of $1.35 per share, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.15, the required return on the market is 12.50%, and the risk-free rate is 4.00%. What is the intrinsic value for MCC’s stock? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer...

A stock just paid a dividend of $1, and is estimated to have a dividend growth...

A stock just paid a dividend of $1, and is estimated to have a dividend growth rate of 25% and 10% in the next two years. The stock is estimated to settle down to a 4% constant dividend growth thereafter. The required return of investors is 12%. (Round your answer to two digits after the decimal point.) show your work What is the dividend of year 1? What is the dividend of year 2? What is the dividend of year...

Subjects