Question

In: Finance

Park's Asian Markets Restaurants currently (d0) pays a $1.50 common stock dividend. Robert is considering an...

Park's Asian Markets Restaurants currently (d0) pays a $1.50 common stock dividend. Robert is considering an investment in Park's Asian markets restaurants and plans to hold the stock for three years, at which time he expects to sell the stocks for $50. Robert Expects the dividend to increase to $2.00 one year from now, $2.75 in two years and $3.75 in three years. What is the current value of Park's Asian markets restaurants common stock to Robert if he requires a 12 percent rate of return?

Solutions

Expert Solution

Current price=Future dividend and value*Present value of discounting factor(rate%,time period)

=2/1.12+2.75/1.12^2+3.75/1.12^3+50/1.12^3

which is equal to

=$42.24(Approx)

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

(Common stock valuation) Bates Inc. pays a dividend of $1.50 and is currently selling for $37.30....
(Common stock valuation) Bates Inc. pays a dividend of $1.50 and is currently selling for $37.30. If investors require a return of 15 percent on their investment from buying Bates stock, what growth rate would Bates Inc. have to provide the investors? The growth rate Bates Inc. would have to provide the investors is ______%. (Round to two decimal places.)
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
Glaham Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1)....
Glaham Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Glaham’s common stock is selling for $18.50 per share and issuance costs are $3.50 per share. What is Glaham’s cost of external equity? 20.59% 12.11% 14.00% 10.00%
A company currently pays a dividend of $2.25 per share (D0 = $2.25).
Nonconstant Growth ValuationA company currently pays a dividend of $2.25 per share (D0 = $2.25). It is estimated that the company's dividend will grow at a rate of 18% per year for the next 2 years, then at a constant rate of 5% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 3%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your...
jay's outdoor wilderness outfitters currently (d0) pays $4.50common stock. jennifer is considering an investment in...
jay's outdoor wilderness outfitters currently (d0) pays $4.50 common stock. jennifer is considering an investment in jays outdoor wilderness outfitters and plans to hold the stock for four years at which time she expects to sell the stock for $70. She expects the dividend to increase to $5.00 one year from now and then grow at an 8% rate for the next five years. What is the current value of jays outdoor wilderness outfitters common stock to jennifer if she...
Determine the price of a share of stock whose last annual dividend payment (D0) was $1.50,...
Determine the price of a share of stock whose last annual dividend payment (D0) was $1.50, assuming a required rate of return of 12% and considering the following: The dividend payment is expected to remain constant (i.e., g = 0) indefinitely. The dividend payment is expected to grow at a constant rate of 3% per year indefinitely. The dividend payment is expected to grow at a rate of 8% for four years and then immediately decline to 3% indefinitely. See...
a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in...
a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6 percent per year indefinitely. If the required return on this stock is 12 percent, what is the current share price? b. Now suppose the company in (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.80 per share, as it has...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT