Assume ABC Corp. pays the dividend of $4.55 this year. For the next 30 years, the...

Assume ABC Corp. pays the dividend of $4.55 this year. For the next 30 years, the firm's dividend will grow by 5.4%, then will grow by 4.7% each year afterwards. The required rate of return for the firm's industry is 10.8%. What is the present value of the firm's stock under the Dividend Discount Model?

Solutions

Expert Solution

The answer is 86.42

calc:

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Lobo Corp currently pays an annual dividend of $5. Starting next fiscal year, the dividend is...

Lobo Corp currently pays an annual dividend of $5. Starting next fiscal year, the dividend is expected to increase by 3% a year. If the current interest rate in the market is 6.5% per year, what is the value of Lobo’s stock today? • $137 • $187 • $147 • $157 You just purchased a 30-year bond with 6% annual coupon, par value of $1000, and 15 years to maturity. The bond makes payments semi-annually and the interest rate in...

Assume that Annie makes $50,000 a year for the next 30 years (she works for 30...

Assume that Annie makes $50,000 a year for the next 30 years (she works for 30 years total). During her entire career, she contributes 8% of her salary to her 401K, and her employer matches 4% of her salary (meaning her total contribution to her 401K is 12% of her salary annually). What is the FV (value in 30 years, or value upon her retirement) of all of Annie’s annual 401K contributions over the 30-year period assuming she earns 9%...

ABC Corp for pays an initial dividend of $2 per share which rises by 5% a...

ABC Corp for pays an initial dividend of $2 per share which rises by 5% a year. The equity cost of capital for ABCamounts to 10%. On the basis of this information, ABC stock should be trading at: a. $20 b. $50 c. $100 d. $40

Luna Health Corp just announced the dividend for next year will be $3.45. The dividend is...

Luna Health Corp just announced the dividend for next year will be $3.45. The dividend is expected to grow at 3.8% for the sustainable future and the expected return is 11.15%. The value of Luna is closest to: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $46.94. b $48.72. c $30.94.

An investor bought the share of ABC Corp for $100. One year from now, ABC pays...

An investor bought the share of ABC Corp for $100. One year from now, ABC pays a dividend of $5 per share and the share price rises to $125. On the basis of this information, the dividend yield, capital gain, and total expected return for holding ABC stock for one year amounts to: a. 5%, 20%, and 25% b. 5%, 25% and 30% c. 4%, 20% and 30% d. 20%, 4%, 30%

Please add the explanation. 6. Killnum Corp. announces that the dividend for the next year will...

Please add the explanation. 6. Killnum Corp. announces that the dividend for the next year will be $2.50 per share rather than the originally expected $1.50 per share. From then on, it is expected that dividends will resume their historical constant growth rate of 5% per year. What would you expect to happen to the price of the stock? Ignore any tax effects. A) The price will likely double. B) The price will likely rise by less than 100%. C)...

Wonderland Corp. will pay a dividend of $3.5 next year. The company plans to maintain a...

Wonderland Corp. will pay a dividend of $3.5 next year. The company plans to maintain a constant growth rate of 5 percent a year forever. Investors’ required rate of return is 12 percent. Robinson Corp. will pay the following dividends over the next four years: $20, $18, $15 and $3. Afterwards the company pledges to maintain a constant 5 percent growth rate in dividends, forever. Investors’ required rate of return is 12 percent. Required: (a) How much will you pay...

A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years

A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.1, the risk-free rate is 9.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer...

TCU Corp. pays a current dividend of $5 per year, which is expected to grow by...

TCU Corp. pays a current dividend of $5 per year, which is expected to grow by 10% the next two years, then by 6% for the following two years, and from year 5 and on maintain a 3% constant growth. The discount rate is 8%. Calculate the current price of one share of TCU Corp.

The CEO of ABC Corp believes that each share of ABC will pay a dividend of...

The CEO of ABC Corp believes that each share of ABC will pay a dividend of $2.40 at the end of the current year, $3.25 next year, and $4.40 the following year. After that dividends should grow at a steady rate of 10% a year for the following 5 years. Then the growth rate should drop to 3% for the foreseeable future. a. Given an opportunity cost of 12% annually, what is the value of each ABC share? b. What...

Subjects