Question

In: Finance

A Corporation announced of its plans to pay: $3 dividend per share in 1 year, $6...

A Corporation announced of its plans to pay:

$3 dividend per share in 1 year,

$6 dividend per share in 2 years,

$9 dividend per share in 3 years,

after which the dividend will be increasing at a constant annual growth rate of 5 percent. The rate of return for this company is 12%. Calculate the value of one share of its stock.

Part of the calculation will be finding the Present Value of a

  1. ordinary annuity
  2. annuity due
  3. regular perpetuity
  4. growing perpetuity

…with the first dividend being

  1. $3
  2. $6
  3. $9
  4. $91.51
  5. $98.08
  6. $102.50
  7. $109.96
  8. $122.15

(Increase decimal places for any intermediate calculations, from the default 2 to 6 or higher. Only round your final answer to TWO decimal places: for example, 100.23.) The final numerical answer to this problem is:

Solutions

Expert Solution

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


Related Solutions

3. A firm announced that it will pay a $0.10 dividend per share to holders of...
3. A firm announced that it will pay a $0.10 dividend per share to holders of record as of Wednesday, July 29, 2020. Holding all else constant, the stock price will be lower by $0.10 per share at the opening of trading on A) Monday, July 27, 2020 B) Tuesday, July 28, 2020. C) Wednesday, July 29, 2020. D) Thursday, July 20, 2020 E) The stock price will not be lower on any of the above days. . Page 3...
General Importers announced that it will pay a dividend of $3.65 per share one year from...
General Importers announced that it will pay a dividend of $3.65 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 4 years. Then, 6 years from today, the company will begin paying an annual dividend of $1.75 forever. The required return is 11.4 percent. What is the price of the stock today?
Question 3 Sports plc expects this year earnings of £6 per share and plans to pay...
Question 3 Sports plc expects this year earnings of £6 per share and plans to pay a £2.5 dividend per share, retaining the rest to reinvest in new projects with an expected return of 10% per year. Assuming that Sports plc will maintain the same dividend payout rate and return on new investments in the future and will not change the number of outstanding shares: a) What is the earnings growth rate according to the plans of Sports plc? b)...
A firm announced that it will pay a $0.10 dividend per share to holders of record...
A firm announced that it will pay a $0.10 dividend per share to holders of record as of Wednesday, July 29, 2020. Holding all else constant, the stock price will be lower by $0.10 per share at the opening of trading on A) Monday, July 27, 2020 B) Tuesday, July 28, 2020. C) Wednesday, July 29, 2020. D) Thursday, July 20, 2020 E) The stock price will not be lower on any of the above days.
A company plans to pay a dividend of $0.50 per share next year rising by $0.25...
A company plans to pay a dividend of $0.50 per share next year rising by $0.25 per year until it reaches $2.50, at which point it will remain flat forever. If the discount rate is 9% per year, what is the present value of the dividends, i.e. the value of a share of stock?
Your company expects to pay a dividend of $1 per share, $2.4 per share and $3...
Your company expects to pay a dividend of $1 per share, $2.4 per share and $3 per share over the next 3years. Thereafter, dividends are expected to grow at 15 % per annum from 2 years, then 10% definitely. If your cost of capital is 24%, what price will investors be willing to pay for a share of the stock today The company has paid a dividend of $300 per share, which is expected to grow at 15% per annum....
Company just announced it will cut its dividend from $3 to $1.50 per share and use...
Company just announced it will cut its dividend from $3 to $1.50 per share and use the extra funds to expand. Prior to the announcement, Bill’s Bootstrap dividends were expected to grow at a 3% rate, and its share price was $20. With the new expansion, the dividend payout rate will be 40% and the return on the expansion will be 20%. What share price would you expect after the announcement and would you recommend the expansion go ahead?
Hudson Corporation will pay a dividend of $3.40 per share next year. The company pledges to...
Hudson Corporation will pay a dividend of $3.40 per share next year. The company pledges to increase its dividend by 7.70 percent per year indefinitely.    If you require a return of 17.30 percent on your investment, how much will you pay for the company's stock today?
Hudson Corporation will pay a dividend of $2.80 per share next year. The company pledges to...
Hudson Corporation will pay a dividend of $2.80 per share next year. The company pledges to increase its dividend by 4.90 percent per year indefinitely. If you require a return of 9.40 percent on your investment, how much will you pay for the company's stock today? Multiple Choice $59.73 $64.71 $18.67 $59.32 $62.22
Company A announced that its current dividend is $10 per share (D0=$10). The dividend is expected...
Company A announced that its current dividend is $10 per share (D0=$10). The dividend is expected to grow at a constant rate of 5 percent a year for the first 2 years and it will be 4 percent thereafter. The risk-free rate is 4 percent, the required rate of return on the market portfolio is 7 percent and the company's beta equals to 2. What is the expected price of the stock today (t=0)?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT