Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If...

Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If the relevant risk return is 5%, what would you be willing to pay for the stock.

A) $120.000

B) S122.000

C) $181.818

D) $184.909

E) $ 5.811

Solutions

Expert Solution

Ans D) $ 184.909

P0 =	Price of Share
D1 =	Current Dividend
Ke =	Cost of Equity
g =	growth rate

P0 =	D1 / (Ke - g)
P0 =	6.102 / (5%- 1.7%)
P0 =	184.909


D1 =	D0* (1 + g)
D1 =	6* (1 + 1.7%)
D1 =	6.1020

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The FI Corporation’s dividends per share are expected to grow indefinitely by 6% per year. a....

The FI Corporation’s dividends per share are expected to grow indefinitely by 6% per year. a. If this year’s year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share...

Trump Office Supplies paid a $6 dividend last year. The dividend is expected to grow at...

Trump Office Supplies paid a $6 dividend last year. The dividend is expected to grow at a constant rate of 8 percent over the next four years. The required rate of return is 14 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. (Do...

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?

The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 8 percent for 2 years, after which dividends are expected to grow at a rate of 6 percent forever.

The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 8 percent for 2 years, after which dividends are expected to grow at a rate of 6 percent forever. Klein's required rate of return on equity (rs) is 12 percent. What is the current price of Klein's common stock?

A company just paid a $2.00 dividend, expected to grow at 2% indefinitely. If the firm's...

A company just paid a $2.00 dividend, expected to grow at 2% indefinitely. If the firm's stock can be sold for $19 per share, what is the cost of common equity. a)11.98% b)11.69% c)12.01% d)12.74% e)none of the above

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year.

The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend is $12.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $18.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share for growth opportunities...

FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If...

FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend is $12.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? b. If the expected earnings per share are $18.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) c. How much is the market paying per share for...

Company Z's earnings and dividends per share are expected to grow indefinitely by 2% a year.

Company Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. If next year's dividend is $7 and the market capitalization rate is 11%, what is the current stock price?

6. Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.15...

6. Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.15 for the next 4 years, with the growth rate falling off to a constant 0.01 thereafter. If the required return is 0.15 and the company just paid a $0.53 dividend, what is the current share price? Answer with 2 decimals (e.g. 45.45). 7. Apocalyptica Corp. pays a constant $8.28 dividend on its stock. The company will maintain this dividend for the next 12 years...

ABC company is expected to grow at the industry constant rate of 6% and its dividend...

ABC company is expected to grow at the industry constant rate of 6% and its dividend yield is 7%. the company is as risky as the average firm in the industry, but it successfully completed some R&D work that leads to the expectation that its earnings and dividends will grow at a rate of 50% this year and 35% in the following year, after which growth return to the 6% industry average. if the last dividend was $1.00, what is...

Subjects