Monsters Inc. is a utility company that recently paid a common stock dividend of $5.45 per share.

Monsters Inc. is a utility company that recently paid a common stock dividend of $5.45 per share. If its divided growth rate is expected to remain at 4 percent per year indefinitely and its equity cost of capital is 9 percent, the current price of a share of Monsters' common stock is closest to $________.

Expert Solution

D0 = Current Dividend = $5.45

g = growth rate = 4%

r = equity cost of capital = 9%

D1 = Expected Dividend = D0 * (1+g) = $5.45 * (1+4%) = $5.668

Current Price of share of common stock = D1 / (r - g)

= $5.668 / (9%-4%)

= $113.36

Therefore, Current price of a shareof Monsters' common stock is closest to $113.36

jeff jeffy answered 2 years ago

Company XYZ common stock just paid a dividend of $2.00 per share and its dividend is...

Company XYZ common stock just paid a dividend of $2.00 per share and its dividend is expected to grow at 10 percent per year for three years and then grow at 4 percent per year forever. XYZ stocks have a 13 percent required return. You should you be willing to pay?

Common stock value—Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.41 per share...

Common stock value—Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.41 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 11%, what required rate of return would result in a...

A company recently paid a dividend of $1.20 per share. It is estimated that the company's...

A company recently paid a dividend of $1.20 per share. It is estimated that the company's dividend will grow at the rate of 15% per year for the next 5 years, then at a constant rate of 7% a year thereafter. The required return on this company is 8.80%. What is the estimated stock price today?

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20%

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20% indefinitely. Stockholders require a rate of return of 11% on this stock. If the stock trades at a price of $16.7, what will your holding period return be if you buy it now and sell it after 2 years for the intrinsic value according to the constant growth dividend discount model?

Develop a valuation model for a common stock assuming that a company just paid a dividend of $1.75 per share.

Develop a valuation model for a common stock assuming that a company just paid a dividend of $1.75 per share. It’s assumed that the dividend will grow at a constant rate of 6% per year forever. The risk-free rate is 6% with an expected return on the market of 12% and a beta of 1.1. Show each step in generating the resulting valuation.

A company has just paid out a per-share dividend of $5.15 on its common stock. Analysts...

A company has just paid out a per-share dividend of $5.15 on its common stock. Analysts expect that these per-shares dividends will grow at a rapid rate of 16% over the coming 6 years, after which the rate of growth in per-share dividends will decline to 4.5%. It is estimated that investors requite a return of 13% on this stock. Each share of this stock should be selling for

A company recently paid a $3 per share dividend, which is expected to grow at a...

A company recently paid a $3 per share dividend, which is expected to grow at a constant rate forever. The company’s stock, has a beta coefficient equal to 1.1, is selling for $40.50 per share. Currently, the risk-free rate of return is 3 percent and the return on an average stock is 10 percent. If the stock is selling at its equilibrium price, what is its growth rate?

The last dividend paid on Spirex Corporation's common stock was $3.00 per share, and the expected...

The last dividend paid on Spirex Corporation's common stock was $3.00 per share, and the expected constant growth rate of dividends is 6.00 percent. If you require a rate of return of 16.80 percent on this stock, what is the most you should pay per share?

ABC's common stock is currently selling for $40 per share. The dividend expected to be paid...

ABC's common stock is currently selling for $40 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant rate for the last 5 years. 5 years ago, the dividend was $3.2. It is expected that to sell, a new common stock issue must be underpriced by $1 per share in floatation costs and a new common stock must be underderpriced $1 per share. show...

A share of Lash Inc.'s common stock just paid a dividend of $2.38. If the expected...

A share of Lash Inc.'s common stock just paid a dividend of $2.38. If the expected long-run growth rate for this stock is 4%, and if investors' required rate of return is 11%, what is the stock price?

Question