After 4 years, this company is expected to growth a slower but constant growth rate. To...

After 4 years, this company is expected to growth a slower but constant growth rate. To estimate its sustainable growth rate (g), we figure out that its ROE will be 0.21 and its Dividend Payout Ratio will be 0.49. This company’s CAPM beta is 0.75. Assume that risk-free rate of return (Rf) is 0.016, and the market risk premium (i.e., Rm - Rf) is 0.07. How much should be this company’s stock price today? TTAL corp has been growing at a fast growth rate. Its cash dividend in the next 4 years are expected to be: Div1 = $3.35; Div2 = $3.75; Div3 = $4.15; Div4 = $4.55.

Solutions

Expert Solution

Can you please recheck the value of ROE. If ROE is 21%(as given), the Sustainable growth rate will be greater than Cost of Equity which is not possible. I had considered the ROE as 2.1% instead of 21% to arrive at stock price of $ 74.36

jeff jeffy answered 4 weeks ago

Next > < Previous

Related Solutions

Company is expected to have extraordinary growth of 20% for four years, after which it will face more competition and slip into a constant growth rate of 5%. Its

Company is expected to have extraordinary growth of 20% for four years, after which it will face more competition and slip into a constant growth rate of 5%. Its required rate of return is 10%. Divieden is $5. What is the price of company's stocks?

Dividend is expected to be constant after year 4, with a growth rate of 4%. The cost of equity is 10%. What is the stock price, P0 , today?

Company has the following dividend stream.D1 = 1.37D2 = 3.35D3 = 4.42D4 = 5.76Dividend is expected to be constant after year 4, with a growth rate of 4%. The cost of equity is 10%. What is the stock price, P0 , today?

The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 8 percent for 2 years, after which dividends are expected to grow at a rate of 6 percent forever.

The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 8 percent for 2 years, after which dividends are expected to grow at a rate of 6 percent forever. Klein's required rate of return on equity (rs) is 12 percent. What is the current price of Klein's common stock?

(Non-constant growth)Pettyway Corp’s next annual dividend (D1) is expected to be $4. The growth rate in...

(Non-constant growth)Pettyway Corp’s next annual dividend (D1) is expected to be $4. The growth rate in dividends over the next three years is forecasted at 15%. After that, Pettyway’s growth rate in dividend is expected to be 5%. The required return is 18%, what is the value of the stock.

The ABC Company is expected to have a constant annual growth rate of 5 percent. It...

The ABC Company is expected to have a constant annual growth rate of 5 percent. It has a price per share of P32 and pays an expected dividend of P2.40. Its competitor, the DEF Company is expected to have a growth rate of 10%, has a price per share of P72, and pays an expected P4.80/share dividend. The required rates of return on equity for the two companies are: A. B. C. D. ABC 13.8% 9.6% 12.5% 16.2% DEF 15.4%...

A company is expected to maintain a constant 3 percent growth rate in its dividends indefinitely.

A company is expected to maintain a constant 3 percent growth rate in its dividends indefinitely. If the company’s stock has a dividend yield of 4.85 percent, what is the required return on the stock? (Hint: dividend yield is a stock’s next dividend divided by its price.)A company pays a constant $8.25 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter

S08-18 Supernormal Growth [LO1]Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $2.45, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Current share price=

Company CT will have a growth rate of 30 percent for 3 years. after that, the...

Company CT will have a growth rate of 30 percent for 3 years. after that, the company will grow at 25 percent for five years. The company will have a growth rate for 15 percent for ten years. Then the company will have a constant growth rate of 10 percent. The required rate of return of investors for this company is 15 percent. if the company just paid a a dividend of 0.50 , what should be the stock price...

Assume a company X has a constant dividend growth rate of 4% per annum for perpetuity....

Assume a company X has a constant dividend growth rate of 4% per annum for perpetuity. This year the company has given a dividend of $5 per share. Further, the required rate of return for the company is 10% per annum. Then, what should be the purchase price for a share of company X?

an annual rate of 13％for the next three years。The growth rate is A firm is expected...

an annual rate of 13％for the next three years。The growth rate is A firm is expected to grow expected to decrease to 10％for the following two years and to be 4％thereafter forever。The last dividend paid（Do）is 243.00。Dividends are paid at the end of each year。The required rate of return is 14％，Find the intrinsic value of the common share。Drawing a diagram will help you to organize the information。

Subjects