Question

In: Finance

The Bell Weather Co is a new firm in a rapidly growing industry. The company is...

The Bell Weather Co is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 31% a year for the next 4 years and then decreasing the growth rate to 3% per year. The company just paid its annual dividend in the amount of $3.30 per share. What is the current value of one share of this stock if the required rate of return is 8.80%?

-I think the answer is 144.6

Red Sun Rising just paid a dividend of $2.80 per share. The company said that it will increase the dividend by 30% and 25% over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.2%. If the required return is 11.4%, what is the stock price today?

-I think the answer is 60

The common stock of Eddie's Engines, Inc., sells for $61 per share. The stock is expected to pay a dividend of $4.10 per share next year. Eddie's has established a pattern of increasing their dividends by 5.8% annually and expects to continue doing so. What is the market rate of return on this stock?

-I think the answer is 12.52

Santa Klaus Toys just paid a dividend of $4.00 per share. The required return is 11.4% and the perpetual dividend growth rate is 3.5%. What price should this stock sell for five years from today?

-I think the answer is 62.24

New Gadgets, Inc. currently pays no dividend but is expected to pay its first annual dividend of $5.90 per share exactly 6 years from today. After that, the dividends are expected to grow at 3.4% forever. If the required return is 11.2%, what is the price of the stock today?

-I think the answer is 44.5

Solutions

Expert Solution

Solution 2:

--------------------------------------------------------------------------------------------------------


Related Solutions

The Bell Weather Co. is a new firm in a rapidly growing industry. The company is...
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 19 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $2.60 per share. What is the current value of one share of this stock if the required rate of return is 8.10 percent?
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is...
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $2.20 per share. What is the current value of one share of this stock if the required rate of return is 7.70 percent?
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is...
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 11% per year for the next 6 years and then decreasing the growth rate to 6% per year forever after. The company just paid its annual dividend in the amount of $1.47 per share. What is the current value of one share if the required rate of return is 10%?  ENTER YOUR ANSWER WITH TWO DECIMAL PLACEs (e.g.,...
1. The Bell Weather Co. is a new firm in a rapidly growing industry. The company...
1. The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 17 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $2.40 per share. What is the current value of one share of this stock if the required rate of return is 7.90 percent? $199.31 $185.11...
The Newton Co. is a new firm in a rapidly growing industry. The company is planning...
The Newton Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15% a year for the next four years (Year 1, Year 2, Year 3, and Year 4) and then increase at the constant growth rate of 5% per year indefinitely. The company just paid its annual dividend in the amount of $1.50 per share. What is the current value of Newton Co.’s stock if the required rate of...
MC algo 8-24 Supernormal Growth The Bell Weather Co. is a new firm in a rapidly...
MC algo 8-24 Supernormal Growth The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $3.40 per share. What is the current value of one share of this stock if the required rate of return is...
Lowes Inc is a new firm in a rapidly growing industry. The company is planning on...
Lowes Inc is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next four years and then decreasing the growth rate to 5% per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share if the required rate of return is 9.25%? A. $35.63B. $38.19C. $41.05D. $43.19E. $45.81
Combined Communications is a new firm in a rapidly growing industry. The company is planning on...
Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 23 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $1.30 per share. What is the current value of one share of this stock if the required rate of return is 9.00 percent?
Combined Communications is a new firm in a rapidly growing industry. The company is planning on...
Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 24 percent a year for the next 4 years and then decreasing the growth rate to 4 percent per year. The company just paid its annual dividend in the amount of $1.10 per share. What is the current value of one share of this stock if the required rate of return is 8.50 percent? A. $41.75 B. $49.58 C....
2. Advanced Medical Technology is a new, rapidly growing firm that produces specialized medical instruments. They...
2. Advanced Medical Technology is a new, rapidly growing firm that produces specialized medical instruments. They sell to hospitals and other surgical units, and a substantial portion of their sales are to foreign governments. Typical payable terms in the industry are payment with 30 days. They recently reported the following financial information:             Sales                            $225,000                       Cost of sales                  180,000                       Inventory                           33,000                      Accounts receivable          72,000                      Accounts payable             30,000                      # of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT