Redwood Leathers currently trades in the markets at $12. The firm last month declared a dividend...

Redwood Leathers currently trades in the markets at $12. The firm last month declared a dividend of $0.20 per share. Analysts predict the firm to grow at 6% every year. What is the intrinsic value of the firm? The investors currently require a 7% rate of return. What is the cost of capital?

Expert Solution

Using Constant Growth Model,

Stock Price = 0.20(1.06)/(0.07 - 0.06)

Stock Price = $21.20

jeff jeffy answered 2 years ago

Four Corners Markets paid an annual dividend of $1.42 a share last month.

Four Corners Markets paid an annual dividend of $1.42 a share last month. Today, the company announced that future dividends will be increasing by 1.3 percent annually. If you require a return of 14.6 percent, how much are you willing to pay to purchase one share of this stock today? Would you buy the stock for $11/share? Explain.

A firm has declared that its next dividend will be .75. If youexpect the dividend...

A firm has declared that its next dividend will be .75. If you expect the dividend to grow by 4% per year and you require an 11% return, what is the maximum price you will be willing to pay for this stock today? Show your work for partial credit.

Lumber Corp's common stock trades at a price of $40 per share. Last year's dividend was...

Lumber Corp's common stock trades at a price of $40 per share. Last year's dividend was $1.6 per share and is expected to grow by 5% per year. Flotation costs for common stock have been estimated at 6%. The company's preferred stock is selling at $50 and has an annual dividend of $4. Lumber Corp. has bonds outstanding with an average coupon rate of 12% and a yield to maturity of 9%. The firm's optimum capital structure is 45% equity,...

A firm has just declared that its dividend next year will be $5.20 per share. That...

A firm has just declared that its dividend next year will be $5.20 per share. That rate of payment will continue for an additional 4 years, after which the dividends will fall back to their usual $4.20 per share. The discount rate is 8 percent. What is the present value of all the future dividends? (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.)

A financial institution trades swaps where 12 month LIBOR is exchanged for a fixed rate of...

A financial institution trades swaps where 12 month LIBOR is exchanged for a fixed rate of interest. Payments are made once a year. The one-year swap rate (i.e., the rate that would be exchanged for 12 month LIBOR in a new one-year swap) is 6 percent. Similarly the two-year swap rate is 6.5 percent. Use this swap data to calculate the one and two year LIBOR zero rates, expressing the rates with continuous compounding. What is the value of an...

On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to...

On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Lexington had 302,000 shares of $0.001 par value common stock issued and outstanding. The fair value of Lexington's common stock was $16.75 per share on October 31, 2017. As a result of this stock dividend, the company's total stockholders' equity please explain in details

A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is...

A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is expected to be 12% for the next 6 years. The dividend growth rate after the first 6 years is expected to be 3% annually. The expected return on the market is 8%, the risk free rate is 3% and the firm’s Beta is 25. Calculate the estimated price (intrinsic value) for a share of this firm’s stock. What does this firm’s Beta measure? Use...

Last year, a firm declared after-tax salvage on machinery of $40101. The machinery's sale price was...

Last year, a firm declared after-tax salvage on machinery of $40101. The machinery's sale price was $35537 and its book value was $49003. What tax rate was used for this salvage?

1.Colson Inc. declared a $320,000 cash dividend. It currently has 12,000 shares of 7%, $100 par...

1.Colson Inc. declared a $320,000 cash dividend. It currently has 12,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is two years in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders? Ans: so I got 12000*100*.07=84000 320000-(84000*2)=152000 It is mentioned two years in arrears on its preferred stock. Do i need to do anything else or the solution is correct? 2. Presented below is the stockholders' equity section of Oaks...

3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate...

3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate is expected to be 8% for the next 3 years. The dividend growth rate after the first 3 years is expected to be 2% annually. The expected return on the market is 7%, the risk free rate is 3% and the firm’s Beta is 1.20. a. Calculate the estimated price (intrinsic value) for a share of this firm’s stock. b. What does this firm’s...

Question