Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are...

Heard, Inc., just paid a dividend of $8.4 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, in- definitely. If investors require a 12 percent return on Heard stock, what is the current price? What will the price be in three years? In 15 years?

Solutions

Expert Solution

P0 = D0(1 + g) / (r - g) = $8.4(1 + 0.06) / (0.12 - 0.06) = $148.40

P3 = P0(1 + g)^3 = $148.40(1 + 0.06)^3 = $176.75

P15 = P0(1 + g)^15 = $148.40(1 + 0.06)^15 = $355.65

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Fowler, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are...

Fowler, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock. a. What is the current price? b. What will the price be in six years and in thirteen years?

1. Boring, Inc. just paid a dividend of $1.50 per share on its stock. The dividends...

1. Boring, Inc. just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow ata constant rate of 5 percent indefinitely. If the required return is 10% on the stock, a. What is the current stock price (P0)? b.What will be the price in three years (P3)? (Hint for a and b: Use the constant dividend model) 2.The next dividend payment by Nespresso Co. will be $2.00 per share. The dividends are expected togrow...

a) ABC Co. just paid a dividend of $1.75 per share on its stock. The dividends...

a) ABC Co. just paid a dividend of $1.75 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Part 1: If investors require a 12 percent return on the stock, what is the current price? Part 2: What will the price be in 8 years? b) A. Corp, B. Corp, and C. Corp each will pay a dividend of $1.35 next year. The growth rate in dividends for...

Fowler, Inc., just paid a dividend of $2.55 per share on itsstock. The dividends are...

Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price? What will the price be in three years? In 15 years?

Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected...

Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected to grow for the next 2 years at 10% rate, and then slow down to a 4% annual rate forever. If investors require 15% return: 8) What is the terminal value of Wicked Textiles in Year 2 (P2)? Question 8 options: $17.52 $28.60 $25.04 $30.31 Question 9 (3.33 points) 9) What should be the current stock price of Wicked Textiles? Question 9 options: $26.30...

Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth...

Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth rate in dividends is expected to be a constant 5.5 percent per year indefinitely. Investors require a return of 18 percent on the stock for the first three years, then a return of 13 percent for the next three years, and then a return of 11 percent thereafter. What is the current share price?

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...

ABC stock just paid dividend $0.55 per share, and future dividends are expected to grow at...

ABC stock just paid dividend $0.55 per share, and future dividends are expected to grow at a constant rate of 1.69% every year. The required return for the ABC stock is 20.99%. What is the expected annual dividend amount (per share) ABC stockholders expect to receive next year?

Mariota Corp. just paid a dividend of $4.35 per share on its stock.

2. MC algo 8-40 Nonconstant DividendsMariota Corp. just paid a dividend of $4.35 per share on its stock. The dividend growth rate is expected to be 3.15 forever and investors require a return of 13.7 percent on this stock. What will the stock price be in 7 years?Multiple Choice$46.48$51.23$21.51$52.84$40.695. MC algo 8-29 Valuing StockBraxton's Cleaning Company stock is selling for $31.75 per share based on a required return of 9.9 percent. What is the the next annual dividend if the...

XYZ Inc. just paid a dividend of $2.50 per share on 100,000 shares outstanding. Dividends are...

XYZ Inc. just paid a dividend of $2.50 per share on 100,000 shares outstanding. Dividends are expected to grow at a constant rate indefinitely. The firm’s ROE is 12 percent, beta is 1.2 and the dividend payout ratio is 45 percent. Treasury notes are yielding 2.75 percent and the market risk premium is estimated at 7.25 percent. The firm has 50,000 bonds outstanding that will mature in 5 years. The bonds are quoted at 107 percent of par and pay...

Subjects