Question
In: Finance
Kilsheimer Company just paid a dividend of $5 per share. Dividends are expected to grow at a constant rate of 7% per year.
Kilsheimer Company just paid a dividend of $5 per share. Dividends are expected to grow at a constant rate of 7% per year. What is the value of the stock to you if the required return is 16%? If the stock is trading for $45 in the market, would you want to buy this stock?
Solutions
Expert Solution
here Diivdend just paid D0 = $5
growth rate g = 7%
rate of return k = 16%
As per dividend discount model
Share Price = D0*(1+g)/(k-g)
= 5*(1+7%)/(16%-7%)
= 5.35/0.09
= $59.44
Since stock is trading at $45 hence it is undervalued as of now. You should buy the stock.
jeff jeffy answered 2 years agoRelated Solutions
Membo just paid a dividend of $2.2 per share. Dividends are expected to grow at 7%,...
Membo just paid a dividend of $2.2 per share. Dividends are
expected to grow at 7%, 6%, and 4% for the next three years
respectively. After that the dividends are expected to grow at a
constant rate of 3% indefinitely. Stockholders require a return of
8 percent to invest in Membo’s common stock. Compute the value of
Membo’s common stock today.
AT&T just paid a $5 dividend, dividends are expected to grow at a 10% rate for...
AT&T just paid a $5 dividend, dividends are expected to grow
at a 10% rate for the next three years and at a 5% rate after that.
What is the value of the stock if investors require a 13% return to
purchase the stock?
1. Membo just paid a dividend of $2.2 per share. Dividends are expected to grow at...
1. Membo just paid a dividend of $2.2 per share. Dividends are
expected to grow at 7%, 6%, and 4% for the next three years
respectively. After that the dividends are expected to grow at a
constant rate of 3% indefinitely. Stockholders require a return of
8 percent to invest in Membo’s common stock. Compute the value of
Membo’s common stock today.
Hank’s Barbecue just paid a dividend of $2.05 per share. The dividends are expected to grow...
Hank’s Barbecue just paid a dividend of $2.05 per share. The
dividends are expected to grow at a 14.5 percent rate for the next
five years and then level off to a 9.5 percent growth rate
indefinitely. If the required return is 12.5 percent, what is the
value of the stock today? What if the required return is 17.5
percent?
Hank’s Barbecue just paid a dividend of $2.05 per share. The dividends are expected to grow...
Hank’s Barbecue just paid a dividend of $2.05 per share. The
dividends are expected to grow at a 14.5 percent rate for the next
five years and then level off to a 9.5 percent growth rate
indefinitely. If the required return is 12.5 percent, what is the
value of the stock today? What if the required return is 17.5
percent?
Hank’s Barbecue just paid a dividend of $2.35 per share. The dividends are expected to grow...
Hank’s Barbecue just paid a dividend of $2.35 per share. The
dividends are expected to grow at a 17.5 percent rate for the next
five years and then level off to a 12.5 percent growth rate
indefinitely. If the required return is 15.5 percent, what is the
value of the stock today? What if the required return is 20.5
percent? (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
ABC, Inc. just paid a dividend of $2.50 per share. The dividends are expected to grow...
ABC, Inc. just paid a dividend of $2.50 per share. The dividends
are expected to grow for the next 3 years at 8% per year, then grow
at 3% per year forever. The required rate of return for ABC stock
is 12% per year. a) What should the market price of ABC stock be?
b) What should the ex-dividend stock price of ABC be in year 2? c)
If you purchased the share of ABC at time 2, at the...
Hank’s Barbecue just paid a dividend of $1.90 per share. The dividends are expected to grow...
Hank’s Barbecue just paid a dividend of $1.90 per share. The
dividends are expected to grow at a 13.0 percent rate for the next
five years and then level off to a 8.0 percent growth rate
indefinitely. If the required return is 11.0 percent, what is the
value of the stock today? What if the required return is 16.0
percent? (Do not round intermediate calculations. Round your answer
to 2 decimal places.)
ABC Corp. just paid a dividend of $1.40 per share. The dividends are expected to grow...
ABC Corp. just paid a dividend of $1.40 per share. The dividends
are expected to grow at 25 percent for the next 7 years and then
level off to a 7 percent growth rate indefinitely. If the required
return is 15 percent, what is the price of the stock today?
A7X Corp. just paid a dividend of $1.35 per share. The dividends are expected to grow...
A7X Corp. just paid a dividend of $1.35 per share. The
dividends are expected to grow at 40 percent for the next 9 years
and then level off to a growth rate of 5 percent indefinitely.
If the required return is 12 percent, what is the price of the
stock today?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- function X=extractDWT(x_train,startS,endS,wStep,wRange) % x_train = input signal % startS = from second % endS = end...
- Do you agree that Social Loafing is similar to Theory X. Give an example to support...
- Computing Cost of Goods Sold and Ending Inventory. Bartov Corporation reports the following beginning inventory and...
- SQL FORMAT (11-13 are completed and correct) -- 11. what are the names of all students...
- You have been hired as a capital budgeting analyst by Advent Sports, a sporting goods firm...
- DESCRIBE WHAT HAPPENS WHEN WE BECOME CONSCIOUS OF SOMETHING. WHAT HAS TO HAPPEN FOR CONSCIOUS AWARENESS...
- 3) You are rolling a 12 sided die 8 times. a) What is the size for...
ADVERTISEMENT