Question

In: Finance

CX Enterprises has the following expected​ dividends: $1.12 in one​ year, $1.18 in two​ years, and...

CX Enterprises has the following expected​ dividends: $1.12 in one​ year, $1.18 in two​ years, and $1.33 in three years. After​ that, its dividends are expected to grow at 4.3% per year forever​ (so that year​ 4's dividend will be 4.3% more than $1.33 and so​ on). If​ CX's equity cost of capital is 11.7%​, what is the current price of its​ stock?

Solutions

Expert Solution

D1 = $1.12

D2 = $1.18

D3 = $1.33

D4 = D3 * (1 + g) = $1.33 * (1 + 0.043) = $1.39

P3 = D4/(r-g) = $1.39/(0.117-0.043) = $1.39/0.074 = $18.75

P0 = [D1/(1+r)] + [D2/(1+r)2] + [(D3+P3)/(1+r)3]

= [$1.12/(1+0.117)] + [$1.18/(1+0.117)2] + [($1.33+$18.75)/(1+0.117)3]

= $1.00 + $0.95 + $14.41

= $16.35

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

CX Enterprises has the following expected​ dividends: $1.15 in one​ year, $1.24 in two​ years, and...
CX Enterprises has the following expected​ dividends: $1.15 in one​ year, $1.24 in two​ years, and $1.32 in three years. After​ that, its dividends are expected to grow at 4.1% per year forever​ (so that year​ 4's dividend will be 4.1% more than $1.32 and so​ on). If​ CX's equity cost of capital is 11.7%​, what is the current price of its​ stock? The price of the stock will be $
CX Enterprises has the following expected​ dividends: $ 1.13 in one​ year, $ 1.24 in two​...
CX Enterprises has the following expected​ dividends: $ 1.13 in one​ year, $ 1.24 in two​ years, and $ 1.32 in three years. After​ that, its dividends are expected to grow at 4.5 % per year forever​ (so that year​ 4's dividend will be 4.5 % more than $ 1.32 and so​ on). If​ CX's equity cost of capital is 12.1 %​, what is the current price of its​ stock?
CYZ Enterprises has the following expected dividends: $1.02 inone year, $1.21 in two years, and...
CYZ Enterprises has the following expected dividends: $1.02 in one year, $1.21 in two years, and $1.32 in three years. After that, its dividends are expected to grow at 3.9% per year forever (so that year 4's dividend will be 3.9% more than $1.32 and so on). If CYZ's equity cost of capital is 11.7%, what is the current price of its stock?The price of the stock will be ________
You expect that Walmart will pay dividends 1.5 in one year, 2.8 in two years and...
You expect that Walmart will pay dividends 1.5 in one year, 2.8 in two years and 4.9 in three years. After that dividends will grow at 3.4% per year and investors required rate of return is 7.3%. According to the dividend discount model what should be the price of Walmarts stocks?
The stock of Sedly Inc. is expected to paythe following dividends. Dividends: Year 1: $2.25 year...
The stock of Sedly Inc. is expected to paythe following dividends. Dividends: Year 1: $2.25 year 2: $3.60 year 3: $1.70 . year 4: $2.00 At the end of the fourth year its value is expected to be $37.70. What should Sedly sell for today if the return on stocks of similar risk is 11.924%? Round PVF values in intermediate calcualtions to four decimal places. Round the answer to two decimal places.
Suppose a firm is expected to increase dividends by 10% in one year and by 15%...
Suppose a firm is expected to increase dividends by 10% in one year and by 15% in year two. After that, dividends will increase at a rate of 7% per year indefinitely. If the last dividend was $2 and the required return is 12%, what is the price of the stock?
Suppose a firm is expected to increase dividends by 5% in one year and by 10%...
Suppose a firm is expected to increase dividends by 5% in one year and by 10% in year two. After that, dividends will increase at a rate of 4% per year indefinitely. If the last dividend was $4 and the required return is 10%, what is the price of the stock?
Suppose a firm is expected to increase dividends by 10% in one year and by 15%...
Suppose a firm is expected to increase dividends by 10% in one year and by 15% in year two. After that, dividends will increase at a rate of 7% per year indefinitely. If the last dividend was $2 and the required return is 12%, what is the price of the stock?
Todd’s Turtles is expected to increase dividends by 20% in one year and by 15% in...
Todd’s Turtles is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. The last dividend was $1, the required return is 12%, what is the current price of the stock? A. $6.90 B. $8.67 C. $10.10 D. $13.72 E. $13.04 thanks
11. Suppose a firm is expected to increase dividends by 10% in one year and by...
11. Suppose a firm is expected to increase dividends by 10% in one year and by 15% in two years. After that, dividends will increase at a rate of 6% per year indefinitely. If the current dividend is $1.05 and the required return is 7.5%, what is the price of the stock?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT