Question

In: Finance

Hughes Co. is growing quickly. Dividends are expected to grow at a 15.8 % rate for...

Hughes Co. is growing quickly. Dividends are expected to grow at a 15.8 % rate for the next three years, with the growth rate falling off to a constant 3.1 % thereafter.

If the required return is 8.4 % and the company just paid a $1.69 dividend, what is the current share price? (Round answer to 2 decimal places. Do not round intermediate calculations).

Solutions

Expert Solution

Year Growth rate Dividend computation Dividend PV factor @8.4%, 1/(1+r)^time Dividend * PV factor
1 1.69*(1+15.8%) $     1.96                    0.9225 $        1.81
2 15.80% 1.96*(1+15.8%) $     2.27                    0.8510 $        1.93
3 15.80% 2.27*(1+15.8%) $     2.62                    0.7851 $        2.06
3 $   51.05                    0.7851 $      40.08
Current share price $      45.87
Current Dividend $         2.62
Rate of return 8.40%
Growth Rate 3.10%
Share Price at the horizon i.e. T3 =Current Dividend*(1+Growth rate)/(Rate of return-Growth Rate)
Share Price at the horizon i.e. T3 =2.62429336728*(1+0.031)/(0.084-0.031)
Share Price at the horizon i.e. T3 $       51.05
Current share price $       45.87 FROM above table

Related Solutions

Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.20 for...
Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.20 for the next 4 years, with the growth rate falling off to a constant 0.01 thereafter. If the required return is 0.14 and the company just paid a $1.95 dividend, what is the current share price? Answer with 2 decimals (e.g. 45.45).
Janicex co is growing quickly. dividends are expected to grow at a rate of 20 percent...
Janicex co is growing quickly. dividends are expected to grow at a rate of 20 percent for the next three years, with growth rate falling off to a constant 5 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $2.50, what is the current share price?
Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for...
Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter. Required: If the required return is 12 percent and the company just paid a $3.80 dividend. what is the current share price? (Do not round your intermediate calculations.) Answer choices: $86.91 $77.51 $83.50 $85.21 $80.42
Jet Co. is growing quickly. Dividends are expected to grow at a 18 percent rate for...
Jet Co. is growing quickly. Dividends are expected to grow at a 18 percent rate for the next 3 years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent and the company just paid a $3.60 dividend, what is the current share price?
6. Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.15...
6. Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.15 for the next 4 years, with the growth rate falling off to a constant 0.01 thereafter. If the required return is 0.15 and the company just paid a $0.53 dividend, what is the current share price? Answer with 2 decimals (e.g. 45.45). 7. Apocalyptica Corp. pays a constant $8.28 dividend on its stock. The company will maintain this dividend for the next 12 years...
Bruin Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent...
Bruin Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling of to a constant 5 percent thereafter. If the required return is 15 percent and the company just paid a $7.16 dividend, what is the share price at the end of supernormal growth (at Year 3)? a. 146.84 b. 97.89 c. 75.18 d. 139.84 e. 93.23 Please show solutions using Excel
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent...
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent, and the company just paid a dividend of $3.85, what is the current share price?
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent...
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter.    If the required return is 12 percent and the company just paid a $1.50 dividend. what is the current share price? Multiple Choice $48.12 $50.08 $44.43 $47.06 $49.10
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 27 percent...
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 27 percent for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter.    If the required return is 14 percent and the company just paid a $2.20 dividend. what is the current share price? Multiple Choice $54.72 $51.68 $49.01 $53.62 $55.81
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 29 percent...
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter.    If the required return is 15 percent and the company just paid a $3.60 dividend. what is the current share price?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT