Cardinal Corp. has just paid out a per share dividend of $5.05 on its common stock...

Cardinal Corp. has just paid out a per share dividend of $5.05 on its common stock for the year ended. Analysts expext this didvidend to grow at a rapid rate of 12% for the coming four years. the growth in per share dividends will decrease to a constant rate of 4% for the foreseeable future after that. Investors in Cardinal common stock require a return of 10%. Based on the following info we would expect the current price of each share of common stock to be:

$88.74

$92.40

$98.13

$103.80

$115.21

Expert Solution

	Required rate=	10.00%
Year	Previous year dividend	Dividend growth rate	Dividend current year	Horizon value	Total Value	Discount factor	Discounted value
1	5.05	12.00%	5.656		5.656	1.1	5.1418
2	5.656	12.00%	6.33472		6.33472	1.21	5.23531
3	6.33472	12.00%	7.0948864		7.0948864	1.331	5.33049
4	7.0948864	12.00%	7.946272768	137.735	145.6812728	1.4641	99.50227
	Long term growth rate (given)=	4.00%			*Value of Stock =*	*Sum of discounted value =*	115.21

Where
Current dividend =Previous year dividend*(1+growth rate)^corresponding year

Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 4 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

jeff jeffy answered 4 months ago

Saunders Corp. has paid out a per-share dividend of $4 on its common stock for the...

Saunders Corp. has paid out a per-share dividend of $4 on its common stock for the year just ended. Analysts expect that the company’s earnings and dividends per share will grow at a rate of 12% for the coming 5 years, and then begin to grow at a constant rate of 3.5% for the foreseeable future after that. The company’s stock has a beta of 1.50. The proxy for the risk-free rate stands at 2.5%, and the market risk premium...

A company has just paid out a per-share dividend of $5.15 on its common stock. Analysts...

A company has just paid out a per-share dividend of $5.15 on its common stock. Analysts expect that these per-shares dividends will grow at a rapid rate of 16% over the coming 6 years, after which the rate of growth in per-share dividends will decline to 4.5%. It is estimated that investors requite a return of 13% on this stock. Each share of this stock should be selling for

XYZ Corp. just paid an annual dividend of $3 per share on its common stock. This...

XYZ Corp. just paid an annual dividend of $3 per share on its common stock. This dividend is expected to grow at a 10% annual rate for two years, after which it is expected to grow at a 6% annual rate forever. If the required return is 10%, what value would you place on this stock?

Mariota Corp. just paid a dividend of $4.35 per share on its stock.

2. MC algo 8-40 Nonconstant DividendsMariota Corp. just paid a dividend of $4.35 per share on its stock. The dividend growth rate is expected to be 3.15 forever and investors require a return of 13.7 percent on this stock. What will the stock price be in 7 years?Multiple Choice$46.48$51.23$21.51$52.84$40.695. MC algo 8-29 Valuing StockBraxton's Cleaning Company stock is selling for $31.75 per share based on a required return of 9.9 percent. What is the the next annual dividend if the...

Company XYZ common stock just paid a dividend of $2.00 per share and its dividend is...

Company XYZ common stock just paid a dividend of $2.00 per share and its dividend is expected to grow at 10 percent per year for three years and then grow at 4 percent per year forever. XYZ stocks have a 13 percent required return. You should you be willing to pay?

WIN Corp just paid a dividend (today) of $2.00 per share on its stock.

WIN Corp just paid a dividend (today) of $2.00 per share on its stock. The dividends are expected to grow at a constant 16% per year indefinitely. If investors require a 23% return on CO stock, what is the current price? a. $28.57 b. $33.14 c. $35.14 d. $12.50 e. $29.00

The SuperBowl Games Corp. paid a dividend of $1.00 per share on its common stock last...

The SuperBowl Games Corp. paid a dividend of $1.00 per share on its common stock last year. However, the dividend is expected to grow by 20% for the next two years, 10% for the third year, before dropping to a constant 5% rate. If the required rate of return is 10%, what is the current price of the company's stock?

Ford Motor Company just paid a dividend of $1.80 per share and its stock has a...

Ford Motor Company just paid a dividend of $1.80 per share and its stock has a beta of 1.2. Risk free rate is 4% and expected return of the stock market is 12%. Ford wants to change its dividend policy to one of the two alternatives, what will be today’s stock price under each situation? Keep plowback ratio at 100% for the next 5 years. At the end of the sixth year, Ford will pay a $3 per share dividend...

2. Peppermint Corporation has just paid a cash dividend of $0.8 per share on its common...

2. Peppermint Corporation has just paid a cash dividend of $0.8 per share on its common stock. The dividend is expected to grow by 10 percent per year. Suppose that investors require a 16 percent return from investments similar to that. Find the current value of a share of Peppermint Corporation. 3. ATA Corporation has just issued a 10-years, with a face value of $1,000, 6% semi-annual coupon bond. The yield-to-maturity (YTM) on this bond is 10% compounded semi-annually. 3a....

A common stock has just paid a dividend of $2.18/share. The dividend is expected to grow by 5.62% per year for 18 years.

A common stock has just paid a dividend of $2.18/share. The dividend is expected to grow by 5.62% per year for 18 years. After that the dividends will stay constant in perpetuity. The required rate of return on the stock is 16%. What should the price of the stock be today?

Question