Question

In: Finance

Fowler, Inc., just paid a dividend of $3.10 per share on its stock. The dividends are...

Fowler, Inc., just paid a dividend of $3.10 per share on its stock. The dividends are expected to grow at a constant rate of 4.25 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock

a: What is the current price?

b: Price in six years years

c:Price in thirteen years

Expert Solution

1) Calculation of price per share:

D0= $3.10

D1= D0*(1+groth)= 3.10*(1+0.0425)=3.23175

Growth= 4.25%

Required return= 9%

Price= D1/(required return-growth)

= 3.23175/(0.09-0.0425)= 3.23175/0.0475= $68.04

Pric per share is $68.04

2)Calculation of price in six years:

Price in six years= current price*(1+growth)^6

=68.04*(1+0.0425)^6

= 68.04*1.283678= 87.34

Price in six years= $87.34

3)Calculation of price in 13 years:

Price in 13 years= current price*(1+growth)^13

=68.04*(1+0.0425)^13

= 68.04*1.71786=116.88

Price in 13 years= $116.88

jeff jeffy answered 1 year ago

Fowler, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are...

Fowler, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock. a. What is the current price? b. What will the price be in six years and in thirteen years?

Fowler, Inc., just paid a dividend of $2.55 per share on itsstock. The dividends are...

Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in three years? In 15 years?

Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are...

Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, in- definitely. If investors require a 12 percent return on Heard stock, what is the current price? What will the price be in three years? In 15 years?

1. Boring, Inc. just paid a dividend of $1.50 per share on its stock. The dividends...

1. Boring, Inc. just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow ata constant rate of 5 percent indefinitely. If the required return is 10% on the stock, a. What is the current stock price (P0)? b.What will be the price in three years (P3)? (Hint for a and b: Use the constant dividend model) 2.The next dividend payment by Nespresso Co. will be $2.00 per share. The dividends are expected togrow...

a) ABC Co. just paid a dividend of $1.75 per share on its stock. The dividends...

a) ABC Co. just paid a dividend of $1.75 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Part 1: If investors require a 12 percent return on the stock, what is the current price? Part 2: What will the price be in 8 years? b) A. Corp, B. Corp, and C. Corp each will pay a dividend of $1.35 next year. The growth rate in dividends for...

Belarus Bearing Just paid a dividend of £7.20 per share on its stock. The dividends are...

Belarus Bearing Just paid a dividend of £7.20 per share on its stock. The dividends are expected to grow at a constant rate of 6% per year, indefinitely. If investors require (the discount rate) a 12% return on Belarus Bearing stock, what is the current price (Po)? What will the price be in 3 (P3) years? In 15 years (P15)? n If the stock is marketable at $95, what would be your investment decisions? Why? n If the firm’s risk as perceived...

The Herjavec Co. just paid a dividend of $1.95 per share on its stock. The dividends...

The Herjavec Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 3 per year indefinitely. Investors require a return of 11 percent on the companys stock. What is the current price of the stock? What will the price be in three years? What will the price be in 6 years?

Universal Laser, Inc., just paid a dividend of $3.10 on its stock. The growth rate in...

Universal Laser, Inc., just paid a dividend of $3.10 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year, indefinitely. Investors require a 15 percent return on the stock for the first three years, a 13 percent return for the next three years, and then an 11 percent return thereafter. What is the current share price for the stock?

Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected...

Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected to grow for the next 2 years at 10% rate, and then slow down to a 4% annual rate forever. If investors require 15% return: 8) What is the terminal value of Wicked Textiles in Year 2 (P2)? Question 8 options: $17.52 $28.60 $25.04 $30.31 Question 9 (3.33 points) 9) What should be the current stock price of Wicked Textiles? Question 9 options: $26.30...

Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth...

Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth rate in dividends is expected to be a constant 5.5 percent per year indefinitely. Investors require a return of 18 percent on the stock for the first three years, then a return of 13 percent for the next three years, and then a return of 11 percent thereafter. What is the current share price?