Question

In: Finance

The common stock of Dayton Repair is expected to pay a $2.28 per share dividend for...

The common stock of Dayton Repair is expected to pay a $2.28 per share dividend for each of the next two years. The company will pay no dividends after that, and is expected to be worth $52 per share at the end of year 3. What is the current price of the stock using a discount rate of 9%?

$40.15

$44.16

$45.92

$48.60

$52.00

Solutions

Expert Solution

Year Cash flow × factor@ 9.00% Present value
0 $                      -   1.0000 $                            -  
1 $                  2.28 0.9174 $                       2.09
2 $                  2.28 0.8417 $                       1.92
3 $               52.00 0.7722 $                     40.15
$                            -  
Price 2.5313 $                     44.16

Price is 44.16

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

Crisp Cookware's common stock is expected to pay a dividend of $1.75 a share at the...
Crisp Cookware's common stock is expected to pay a dividend of $1.75 a share at the end of this year (D1 = $1.75); its beta is 0.7. The risk-free rate is 5.6% and the market risk premium is 4%. The dividend is expected to grow at some constant rate, gL, and the stock currently sells for $80 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3...
A stock is expected to pay a dividend of $1.25 per share in two months and...
A stock is expected to pay a dividend of $1.25 per share in two months and in five months. The stock price is $127, and the risk-free rate of interest is 5% p.a. with continuous compounding for all maturities. An investor has just taken a long position in a six-month forward contract on the stock. a) What are the forward price and the initial value of the forward contract? b) Three months later, the price of the stock is $135...
A stock is expected to pay a dividend of $1.50 per share in three months and...
A stock is expected to pay a dividend of $1.50 per share in three months and in six months. The stock price is $60, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a nine-month forward contract on the stock. What are the forward price and the initial value of the forward contract? Three months later, the price of the stock is $55 and...
A stock is expected to pay a dividend of $2 per share in three months. The...
A stock is expected to pay a dividend of $2 per share in three months. The share price is $75, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a long position in a six-month forward contract on a share of stock. a) What are the forward price and the initial value of the forward contract? b) Three months later, immediately after the payment of the dividend, the...
A stock is expected to pay a dividend of $0.70 per share in one month, in...
A stock is expected to pay a dividend of $0.70 per share in one month, in four months and in seven months. The stock price is $30, and the risk-free rate of interest is 7% per annum with continuous compounding for all maturities. You have just taken a short position in an eight-month forward contract on the stock. Six months later, the price of the stock has become $34 and the risk-free rate of interest is still 7% per annum....
A stock is expected to pay a dividend of $0.50 per share in two month, in...
A stock is expected to pay a dividend of $0.50 per share in two month, in five months and in eight months. The stock price is $20, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. You have just taken a short position in a nine-month forward contract on the stock. Seven months later, the price of the stock has become $23 and the risk-free rate of interest is still 5% per annum....
A stock is expected to pay a dividend of €2 per share in 9 months. The...
A stock is expected to pay a dividend of €2 per share in 9 months. The stock price is €20, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. An investor has just taken a long position in a 12-month forward contract on the stock. What is the Forward price (K)?
A stock is expected to pay a dividend of $1.5 per share in three months and...
A stock is expected to pay a dividend of $1.5 per share in three months and in six months. The stock price is $80, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. An investor has just taken a long position in a eight-month forward contract on the stock. (a) What are the forward price and the initial value of the forward contract? (b) Four months later, the price of the stock is...
A stock is expected to pay a dividend of $0.80 per share in two months, in...
A stock is expected to pay a dividend of $0.80 per share in two months, in five months and in eight months. The stock price is $35, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. You have just taken a long position in a nine-month forward contract on the stock. Seven months later, the price of the stock has become $38 and the risk-free rate of interest is still 8% per annum....
A stock is expected to pay a dividend of $0.50 per share in two month, in...
A stock is expected to pay a dividend of $0.50 per share in two month, in five months and in eight months. The stock price is $20, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. You have just taken a short position in a nine-month forward contract on the stock. Seven months later, the price of the stock has become $23 and the risk-free rate of interest is still 5% per annum....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT