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.)

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Please note : In above sheet, Stock price is calculated as per Dividend Discount Model. We can also calculate the stock price as per Earning Discount model but will get different result. Stock Price under earning discount model would be $156.42.

jeff jeffy answered 2 months ago

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’s earnings and dividends per share are expected to grow by 3% per year for...

Company Z’s earnings and dividends per share are expected to grow by 3% per year for the next 4 years, then stop growing. In year 5 and after, it will pay out all earnings as dividends. Assume next year’s dividend is $3, the market capitalization rate is 10%, and next year’s EPS = $10. What is Company Z’s stock price? Please explain answer and solution clearly

Part 1 Company Z-prime’s earnings and dividends per share are expected to grow by 2% a...

Part 1 Company Z-prime’s earnings and dividends per share are expected to grow by 2% 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 $10, the market capitalization rate is 12% and next year’s EPS is $17. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Part 2 Company's Z's earnings and dividends per...

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?

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.

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per...

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per year in the future. Shelby's common stock sells for $24.00 per share, its last dividend was $2.00, and the company will pay a dividend of $2.06 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 1.2, the risk-free rate is 4%,...

Assume a company you are analyzing is expected to grow its earnings and dividends at a...

Assume a company you are analyzing is expected to grow its earnings and dividends at a constant rate in the foreseeable future (forever). How will you find the intrinsic value of your stock? This answer requires multiple steps and concepts

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...

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...

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...

Question