Question

In: Finance

What are the limitations of the dividend discount model? A stock currently pays a dividend of...

  • What are the limitations of the dividend discount model?
  • A stock currently pays a dividend of $4 for the year. Expected dividend growth is 20% for the next three years and then growth is expected to revert to 4% thereafter for an indefinite amount of time. The appropriate required rate of return is 10%. What is this stock’s intrinsic value?
  • What is the rate of return on an investment that costs $500 and is sold after 1 year for $560?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

What are the limitations of the dividend discount model? A stock currently pays a dividend of...
What are the limitations of the dividend discount model? A stock currently pays a dividend of $4 for the year. Expected dividend growth is 20% for the next three years and then growth is expected to revert to 4% thereafter for an indefinite amount of time. The appropriate required rate of return is 10%. What is this stock’s intrinsic value? What is the rate of return on an investment that costs $500 and is sold after 1 year for $560?
Using a dividend discount model, what is the price for this stock? Stock covariance with the...
Using a dividend discount model, what is the price for this stock? Stock covariance with the market= 0.5 Market variance = 0.25 Stock covariance with a second risk factor= 0.6 Variance of the second factor= 0.3 Market Premium:3% Second factor risk premium=1% Risk free rate =2 % Current earnings per share= $5, The ROE is expected to shrink (decrease) at the rate 10% for first 5 years The ROE is expected to grow at the rate 8% forever after the...
Enumerate the steps of using dividend discount model to value stock?
Enumerate the steps of using dividend discount model to value stock?
Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock....
Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock. The stock currently pays no dividends, but expected to begin paying dividends in five years. The firm's cost of equity is 11%. Compute the value of a stock paying no dividends today, but that is expected to pay annual dividends of $4 in five years and the stock is expected to grow at a rate of 9% for the next six years that it...
The dividend discount model can be simply stated as the stock is worth the total of...
The dividend discount model can be simply stated as the stock is worth the total of all the future dividend payments, discounted back to their present value. Select a publicly traded stock of a multinational enterprise. Calculate the value of the stock using the dividend discount model. Show you calculations and discuss any assumptions you used in this calculation, such as growth. Compare your calculation to the current price of the stock. Is the stock currently trading at, above, or...
The dividend discount model can be simply stated as the stock is worth the total of...
The dividend discount model can be simply stated as the stock is worth the total of all the future dividend payments, discounted back to their present value. Select a publicly traded stock of a multinational enterprise. Calculate the value of the stock using the dividend discount model. Show you calculations and discuss any assumptions you used in this calculation, such as growth. Compare your calculation to the current price of the stock. Is the stock currently trading at, above, or...
The dividend discount model is suitable for pricing the price of one stock on the basis...
The dividend discount model is suitable for pricing the price of one stock on the basis of the pricing of other stocks in the same industry (answer yes or no and give explanation for your answer)
The preferred stock of General Motors pays an annual dividend of $1 forever. The appropriate discount...
The preferred stock of General Motors pays an annual dividend of $1 forever. The appropriate discount rate is 8% per year. What is the present value of the preferred stock?
Explain the dividend discount model as a basis for stock valuation, including a example in your...
Explain the dividend discount model as a basis for stock valuation, including a example in your initial post. What are the challenges of predicting future dividends, and what other factors affecting stock price are not accounted for in the dividend discount model?  
. Dividend discount model: Consider the following three stocks: a. Stock A is expected to provide...
. Dividend discount model: Consider the following three stocks: a. Stock A is expected to provide a dividend of $15 a share forever. b. Stock B is expected to pay a dividend of $9 next year. Thereafter, dividend growth is expected to be 4% a year forever. c. Stock C is expected to pay a dividend of $9 next year. Thereafter, dividend growth is expected to be 30% a year for three years (i.e., years 2 through 4) and zero...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT