Question

In: Finance

7.7 Constant growth: Maurica Ltd is a consumer products company growing at a constant rate of...

7.7 Constant growth: Maurica Ltd is a consumer products company growing at a constant rate of 6.5 per cent. The company’s last dividend was $3.36. If the required rate of return was 14 per cent, what is the market value of this share?

Solutions

Expert Solution

Market Value = Expected Dividend / (Requried Return - Growth rate)

= Current Dividend * (1+Growth Rate) /(Requried Return - Growth rate)

= $ 3.36*(1+6.5%) /(14%-6.5%)

= $ 3.5784/7.5%

= $ 47.712

Answer = $ 47.71

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Assume the last dividend was $1.15 and the company is growing at a constant rate of...
Assume the last dividend was $1.15 and the company is growing at a constant rate of 7% per year. Investors require 13% to invest in this company. What is the capital gains yield for the first year?
A company is growing at a constant rate of 8 percent. Last week it paid a...
A company is growing at a constant rate of 8 percent. Last week it paid a dividend of $3.00. If the required rate of return is 15 percent, what is the price of the share three years from now? a. $42.83. b. $46.29. c. $58.31. d. $51.02. e. $48.30.
After 4 years, this company is expected to growth a slower but constant growth rate. To...
After 4 years, this company is expected to growth a slower but constant growth rate. To estimate its sustainable growth rate (g), we figure out that its ROE will be 0.21 and its Dividend Payout Ratio will be 0.49. This company’s CAPM beta is 0.75. Assume that risk-free rate of return (Rf) is 0.016, and the market risk premium (i.e., Rm - Rf) is 0.07. How much should be this company’s stock price today? TTAL corp has been growing at...
The FCF of company ABC is growing at a constant rate 8%. FCF0 = $25 million....
The FCF of company ABC is growing at a constant rate 8%. FCF0 = $25 million. The weighted average cost of capital (WACC) for this company is 18%. This company has a short-term investment of $7 million, debt $12 million and preferred stock of $1 million. The number of shares outstanding is 10 million. How much is the stock price according to the FCFF valuation model? 2. Company XYZ has the following FCF: Year 1 D1 = $ 0.5 Year...
Assume that Techtron is a constant growth company with a required rate of return of 13...
Assume that Techtron is a constant growth company with a required rate of return of 13 percent whose last dividend (D0, which was paid yesterday) was $2.00, and whose dividend is expected to grow indefinitely at a 5 percent rate. a. What is the firm’s expected dividend stream over the next 3 years?                          b. What is the firm’s current stock price? c. What is the stock's expected value 1 year from now?             d. What are the expected dividend yield, the...
Non-constant Growth Stock The last dividend paid by Company A was $2.20. Its growth rate is...
Non-constant Growth Stock The last dividend paid by Company A was $2.20. Its growth rate is expected to be 10 percent for three years, after which dividends are expected to grow at a rate of 6 percent forever. The company’s stockholders require a rate of return on equity of 11.5 percent. a. Draw a clear and accurate timeline of the expected cash flows. (The timeline should consist of time periods (t = 0, 1, 2, . . .), the cash...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (effecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 7 percent per year and last indefinitely. If GRF just paid a $2.00 dividend and the appropriate discount rate is 15 percent, then what is the value of a share of GRE? SOLUTION Excel
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the...
Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (affecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 2.4 percent per year and last indefinitely. If GRF just paid a $4.00 dividend and the appropriate discount rate is 17.5 percent, then what is the value of a share of GRF? Enter your answer to two decimal places.
Stocks A company has a constant growth rate of 5%. The company's risk adjusted discount rate...
Stocks A company has a constant growth rate of 5%. The company's risk adjusted discount rate is 7%. The company has a $2 dividend. What is the per share value of the stock? Bonds Calculate the value of each of the bonds below. Interest is paid semi-annually. Bond Par Value Years to Maturity Coupon Interest Rate Required Return Bond #1 1000 25 10% 12% Bond #2 1000 15 6% 6% Bond #3 500 10 7% 10%
The ABC Company is expected to have a constant annual growth rate of 5 percent. It...
The ABC Company is expected to have a constant annual growth rate of 5 percent. It has a price per share of P32 and pays an expected dividend of P2.40. Its competitor, the DEF Company is expected to have a growth rate of 10%, has a price per share of P72, and pays an expected P4.80/share dividend. The required rates of return on equity for the two companies are: A. B. C. D. ABC 13.8% 9.6% 12.5% 16.2% DEF 15.4%...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT