Shengyuan Company has just paid a cash dividend of 20 cents per share. Investors require a...

Shengyuan Company has just paid a cash dividend of 20 cents per share. Investors require a 16% return from investments such as this. If the dividend is expected to grow at a steady rate of 4% per year, what is the current value of the share? What will the share be worth in five years? Show working out.

P₀ = D₁/(r – g) = D₀ (1 + g)/(r – g)

Expert Solution

D0 = 0.20

R = 16%

G = 4%

P0 = 0.20 * (1 + 0.04) / (0.16 - 0.04)

= 0.2080 / 0.12

= 1.7333

Price at the end of 5 years = P0 * (1 + G)^5

= 1.7333 * (1 + 4%)^5

= $2.11

jeff jeffy answered 2 years ago

Shengyuan Company has just paid a cash dividend of 20 cents per share.

a) Shengyuan Company has just paid a cash dividend of 20 cents per share. Investors require a 16% return from investments such as this. If the dividend is expected to grow at a steady rate of 4% per year, what is the current value of the share? What will the share be worth in five years? Show working out. ...

Company ABC just paid a cash dividend of $0.50 per share. Investors require a 15% return....

Company ABC just paid a cash dividend of $0.50 per share. Investors require a 15% return. If the dividend is expected to grow at a steady 6% per year, what is the current value of a share? What will the share be worth in four years?

A company just paid a dividend of $1.95 per share, and that dividend is expected to...

A company just paid a dividend of $1.95 per share, and that dividend is expected to grow at a constant rate of 4.50% per year in the future. The company's beta is 1.65, the market risk premium is 8.5%, and the risk-free rate is 6.50%. What is the company's current stock price?

A company has just paid a dividend of $ 3 per share, D0=$ 3 . It...

A company has just paid a dividend of $ 3 per share, D0=$ 3 . It is estimated that the company's dividend will grow at a rate of 18 % percent per year for the next 2 years, then the dividend will grow at a constant rate of 5 % thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the...

A company has just paid a dividend of $ 2 per share, D0=$ 2 . It...

A company has just paid a dividend of $ 2 per share, D0=$ 2 . It is estimated that the company's dividend will grow at a rate of 18 % percent per year for the next 2 years, then the dividend will grow at a constant rate of 7 % thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the...

(a) ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually....

(a) ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually. Analysts estimate that dividends per share will grow at a rate of 20% for the next 2 years, at 15% for the subsequent 3 years, and at 3% thereafter. If the shareholders’ required rate of return is 12% per year, then what is the price of the stock today? What will be the ex-dividend price at the end of the first year? What will...

A company just paid a dividend of $1.53 per share and you expect the dividend to...

A company just paid a dividend of $1.53 per share and you expect the dividend to grow at a constant rate of 5.6% per year indefinitely into the future. If the required rate of return is 13.4% per year, what would be a fair price for this stock today? (Answer to the nearest penny per share.)

A company just paid a dividend of $0.79 per share and you expect the dividend to...

A company just paid a dividend of $0.79 per share and you expect the dividend to grow at a constant rate of 5.2% per year indefinitely into the future. If the required rate of return is 12.4% per year, what would be a fair price for this stock today? (Answer to the nearest penny per share.) A 6.4% coupon bearing bond pays interest semi-annually and has a maturity of 6 years. If the current price of the bond is $1,023.87,...

The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected...

The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.75, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is Jameson's current stock price, P0?

Assume a corporation has just paid a dividend of $ 3.52 per share. The dividend is...

Assume a corporation has just paid a dividend of $ 3.52 per share. The dividend is expected to grow at a rate of 3.8% per year forever, and the discount rate is 6.9%. What is the Capital Gains yield of this stock? Enter your answer as a percentage, rounded to 1 decimal, and without the percentage sign. So, if your answer is 0.05678, just enter 5.7.

Question