Question

In: Finance

For the next three years MBA Inc. is expected to pay​ $1.50, $2.00 and​ $2.50 in...

For the next three years MBA Inc. is expected to pay​ $1.50, $2.00 and​ $2.50 in dividends and after that dividends will grow at the rate of​ 4% in perpetuity. The required rate of return is​ 12%. Assuming the first dividend will be paid in exactly one​ year, the intrinsic value of MBA shares is

A. $28.96

B. $38.50

C. $25.37

D. $27.85

Solutions

Expert Solution

Ans is D.$27.85

Calculations-

Please upvote if the ans is helpful.In case of doubt,do comment.Thanks.


Related Solutions

A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50.
A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 13 percent, and if you require a 18 percent rate of return, how much should you be willing to pay for this stock?
A firm is not expected to pay a dividend for the next three years. If the...
A firm is not expected to pay a dividend for the next three years. If the expected share price of the firm in three years in $29 and investors require a 11% rate of return, what is the expected share price today?
A firm is not expected to pay a dividend for the next three years. If the...
A firm is not expected to pay a dividend for the next three years. If the expected share price of the firm in three years is $48 and investors require a 14% rate of return, what is the expected share price today?
A security is expected to pay a dividend of $2.50 next year. In addition, dividends are...
A security is expected to pay a dividend of $2.50 next year. In addition, dividends are expected to grow at 4% per annum and investors have a 12% required rate of return. a. What will the dividends be in each year for the next 200 years? Set this up on an excel spreadsheet with the years going down a column using Excel. What is the present value of the above dividend stream ?  What is the sum of the dividends expected...
If Yumms Inc. is expected to pay dividends of $3.93 for the next seven years, and...
If Yumms Inc. is expected to pay dividends of $3.93 for the next seven years, and then after that the dividends are expected to grow at 1.8% thereafter. What would you be willing to pay for a share of stock if the required return is 3.8 percent? If the risk premium for large company stocks is currently 4%, and the T-Bill rate is 2.3%, then what is the current large company stock return?
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...
Sanford common stock is expected to pay $1.50 in dividends next​ year, and the market price...
Sanford common stock is expected to pay $1.50 in dividends next​ year, and the market price is projected to be $52.35 per share by​year-end. If investors require a rate of return of 13 percent, what is the current value of the​ stock?
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then...
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then the expected dividend is $0.60 per share, which will continue to grow at a constant rate of 25% per annum for another 3 years. After that, the dividend will grow indefinitely at 4% per annum. If the rate of return is 11% per annum, what is the current value of a share in ABC Ltd? b) If the discount rate is 8%, what is...
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then...
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then the expected dividend is $0.70 per share, which will continue to grow at a constant rate of 25% per annum for another 3 years. After that, the dividend will grow indefinitely at 4% per annum. If the rate of return is 10% per annum, what is the current value of a share in ABC Ltd? b) If the discount rate is 8%, what is...
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then...
a) ABC Ltd is not expected to pay any dividends for the next 3 years. Then the expected dividend is $0.70 per share, which will continue to grow at a constant rate of 25% per annum for another 3 years. After that, the dividend will grow indefinitely at 4% per annum. If the rate of return is 10% per annum, what is the current value of a share in ABC Ltd? b) If the discount rate is 8%, what is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT