ABC is expected to pay a dividend of $1.25 every six months for the next four...

ABC is expected to pay a dividend of $1.25 every six months for the next four years. the current share price is $25.76 and the relevant discount rate is 14% compounded semiannually. what do you expect the share price at the end of year 4 be?

Solutions

Expert Solution

The expected future price of the stock at the end of year 4, P4 = P0 * (1 + r)^n

r = 14%/2 = 0.07 per semi-annual period

n = 4 * 2 = 8 semi-annual period

P4 = 25.76 * (1 + 0.07)^8

P4 = 25.76 * 1.7181861798

P4 = $44.2604759916

The expected future price of the stock at the end of year 4 is $44.2604759916

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

ABC is expected to pay a dividend of $1.25 every six months for the next four...

ABC is expected to pay a dividend of $1.25 every six months for the next four years. The current share price is $25.76 and the relevant discount rate is 14% (compounded semi-annually). What do you expect the share price at the end of year 4 to be? a. $28.82 b. $26.74 c. $31.44 d. $25.12 Please don't use the PVA formula.

A stock is expected to pay a dividend of $1.25 per share in two months and...

A stock is expected to pay a dividend of $1.25 per share in two months and in five months. The stock price is $127, and the risk-free rate of interest is 5% p.a. with continuous compounding for all maturities. An investor has just taken a long position in a six-month forward contract on the stock. a) What are the forward price and the initial value of the forward contract? b) Three months later, the price of the stock is $135...

A stock is expected to pay a constant dividend of $3/share every quarter (every 3 months)...

A stock is expected to pay a constant dividend of $3/share every quarter (every 3 months) and the first dividend is expected in exactly 1 year. If the market's required return on this stock is 11% PER YEAR, what is the market value of the stock today? [Express your final answer in dollars and cents (rounded to 2 decimal places)] Market Value = $ per share

A stock is expected to pay a dividend of $1.25 at the end of the year...

A stock is expected to pay a dividend of $1.25 at the end of the year (i.e., D1 = $1.25), and it should continue to grow at a constant rate of 7% a year. If its required return is 12%, what is the stock's expected price 5 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.

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?

What is the value today of a money machine that will pay $3,129.00 every six months...

What is the value today of a money machine that will pay $3,129.00 every six months for 13.00 years? Assume the first payment is made 3.00 years from today and the interest rate is 14.00%. Answer format: Currency: Round to: 2 decimal places.

Shown below are the budgeted sales for ABC Company for the next six months: Sales for...

Shown below are the budgeted sales for ABC Company for the next six months: Sales for Cash Sales on Account January $18,000 $ 95,000 February $15,000 $130,000 March $24,000 $ 70,000 April $26,000 $120,000 May $19,000 $ 90,000 June $14,000 $100,000 On average, 45% of the sales on account are collected in the month of sale, 30% are collected in the month following sale, 15% are collected in the second month following sale, and the remaining 10% is collected three...

Shown below are the budgeted sales for ABC Company for the next six months: Sales for...

Shown below are the budgeted sales for ABC Company for the next six months: Sales for Cash Sales on Account January $15,000 $110,000 February $18,000 $125,000 March $26,000 $119,000 April $24,000 $140,000 May $14,000 $ 88,000 June $18,000 $137,000 On average, 25% of the sales on account are collected in the month of sale, 30% are collected in the month following sale, 35% are collected in the second month following sale, and the remaining 10% is collected three months after...

Shown below are the budgeted sales for ABC Company for the next six months: Sales for...

Shown below are the budgeted sales for ABC Company for the next six months: Sales for Cash Sales on Account January $15,000 $ 70,000 February $18,000 $ 80,000 March $14,000 $160,000 April $26,000 $120,000 May $18,000 $170,000 June $24,000 $105,000 On average, 35% of the sales on account are collected in the month of sale, 40% are collected in the month following sale, 10% are collected in the second month following sale, and the remaining 15% is collected three months...

Subjects