A stock just paid a dividend this morning of $1.30. Dividends are expected to grow at...

A stock just paid a dividend this morning of $1.30. Dividends are expected to grow at 14.00% for the next two years. After year 2, dividends are expected to grow at 8.06 % for the following three years. At that point, dividends are expected to grow at a rate of 6.00% forever. If investors require a return of 15.00% to own the stock, what is its intrinsic value?

Expert Solution

D1=(1.3*1.14)=1.482

D2=(1.482*1.14)=1.68948

D3=(1.68948*1.0806)=1.82565209

D4=(1.82565209*1.0806)=1.97279965

D5=(1.97279965*1.0806)=2.1318073

Value after year 5=(D5*Growth rate)/(Required return-Growth rate)

=(2.1318073*1.06)/(0.15-0.06)

=25.1079526

Hence intrinsic value=Future dividend and value*Present value of discounting factor(rate%,time period)

=1.482/1.15+1.68948/1.15^2+1.82565209/1.15^3+1.97279965/1.15^4+2.1318073/1.15^5+25.1079526/1.15^5

=$18.44(Approx)

jeff jeffy answered 2 years ago

A7X Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow...

A7X Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow at 35 percent for the next 8 years and then level off to a growth rate of 6 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? Multiple Choice $92.39 $2.93 $90.58 $88.77 $66.62

a. A stock just paid a dividend of $1.04. The dividend is expected to grow at...

a. A stock just paid a dividend of $1.04. The dividend is expected to grow at 26.98% for three years and then grow at 4.97% thereafter. The required return on the stock is 11.63%. What is the value of the stock? b. A stock just paid a dividend of $1.17. The dividend is expected to grow at 22.53% for five years and then grow at 4.80% thereafter. The required return on the stock is 14.27%. What is the value of...

A stock just paid a dividend of $2.40. The dividend is expected to grow at a...

A stock just paid a dividend of $2.40. The dividend is expected to grow at a rate of 5% forever. If the stock is currently selling for $25.00, what return do investors require to hold this stock? 18%, 17%, 16%, 15% A project is projected to cost $2,000,000 to undertake. It will generate positive cash inflows as follows: Year 1 - $400,000; Year 2 – 500,000; Year 3 - $650,000; Year 4 – 700,000; Year 5 – 800,000. What is...

ABC stock just paid dividend $0.55 per share, and future dividends are expected to grow at...

ABC stock just paid dividend $0.55 per share, and future dividends are expected to grow at a constant rate of 1.69% every year. The required return for the ABC stock is 20.99%. What is the expected annual dividend amount (per share) ABC stockholders expect to receive next year?

Thirsty Cactus Corp. just paid a dividend of $1.30 per share. The dividends are expected to...

Thirsty Cactus Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow at 35 percent for the next 9 years and then level off to a 8 percent growth rate indefinitely. Required : If the required return is 14 percent, what is the price of the stock today?

A stock just paid a dividend of $2.27. The dividend is expected to grow at 22.36%...

A stock just paid a dividend of $2.27. The dividend is expected to grow at 22.36% for five years and then grow at 3.96% thereafter. The required return on the stock is 10.02%. What is the value of the stock?

A stock just paid a dividend of $1.28. The dividend is expected to grow at 27.28%...

A stock just paid a dividend of $1.28. The dividend is expected to grow at 27.28% for three years and then grow at 3.92% thereafter. The required return on the stock is 11.35%. What is the value of the stock? A stock just paid a dividend of $1.95. The dividend is expected to grow at 25.66% for five years and then grow at 3.74% thereafter. The required return on the stock is 11.13%. What is the value of the stock?...

Question

A stock just paid a dividend this morning of $1.30. Dividends are expected to grow at...

Solutions

Expert Solution

Related Solutions