FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If...

FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend is $12.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $18.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceed the market capitalization rate)? (Round your answer to 2 decimal places.) Next Visit question map question 5 of 10 Total5 of 10 Prev

Expert Solution

1.
=D1/(r-g)
=12/(10%-5%)=240

2.
=ROE/(1-D1/E1)
=18%/(1-12/18)=54.00%

3.
=D1/(r-g)-D1/r
=12/(10%-5%)-12/10%=120

jeff jeffy answered 2 years ago

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year.

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend is $12.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $18.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share for growth opportunities...

The FI Corporation’s dividends per share are expected to grow indefinitely by 6% per year. a....

The FI Corporation’s dividends per share are expected to grow indefinitely by 6% per year. a. If this year’s year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share...

Company Z's earnings and dividends per share are expected to grow indefinitely by 2% a year.

Company Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. If next year's dividend is $7 and the market capitalization rate is 11%, what is the current stock price?

Kilsheimer Company just paid a dividend of $5 per share. Dividends are expected to grow at a constant rate of 7% per year.

Kilsheimer Company just paid a dividend of $5 per share. Dividends are expected to grow at a constant rate of 7% per year. What is the value of the stock to you if the required return is 16%? If the stock is trading for $45 in the market, would you want to buy this stock?

Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If...

Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If the relevant risk return is 5%, what would you be willing to pay for the stock. A) $120.000 B) S122.000 C) $181.818 D) $184.909 E) $ 5.811

Hudaverdi Ltd pay current dividends of $0.61 per share with these dividends expected to grow at...

Hudaverdi Ltd pay current dividends of $0.61 per share with these dividends expected to grow at a rate of 2% per year in perpetuity. Hudaverdi Ltd shares are currently trading at $6.91 per share. What is the cost of equity finance for Hudaverdi Ltd? Give your answer as a percentage per annum to 1 decimal place. Cost of equity = % pa Gertrude's Great Gloves issue bonds with a face value of $1,000, paying interest at j2 = 6.75%, redeemable in...

A stock will pay an annual dividend next year of $5 per share. Dividends will grow...

A stock will pay an annual dividend next year of $5 per share. Dividends will grow at 30% for the following 2 years and then at 5% thereafter. What is V0 if K=0.1?

Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its...

Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) My guess was: $153.42 and this WAS NOT CORRECT

Company Z-prime’s earnings and dividends per share are expected to grow by 3% a year. Its...

Company Z-prime’s earnings and dividends per share are expected to grow by 3% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 11% and next year’s EPS is $16. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Company ABC's earnings per share this year are $5. ABC's earnings are expected to grow at...

Company ABC's earnings per share this year are $5. ABC's earnings are expected to grow at rate g every year. The return that investors expect on ABC is 10%. ABC's current (ex-dividend) stock price is $80. ABC's payout ratio is 0.4. (a) Determine rate g. (b) Determine the present value of ABC's growth opportunities.

Question