Assume that a company just paid a dividend of $2 per share. The expected growth rate...

Assume that a company just paid a dividend of $2 per share. The expected growth rate in the dividend is a constant 10%. If your required rate of return for the stock is 15%, what is the value of the stock to you today?

Solutions

Expert Solution

Stock price = D1 / r - g

Where,

D1 = Expected Dividend =$2*1.10 =2.20

r= required rate of return

g= growth rate

=2.2/0.15-0.1

= $44

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A company just paid a $2 dividend per share. The dividend growth rate is expected to...

A company just paid a $2 dividend per share. The dividend growth rate is expected to be 10% for each of the next 2 years, after which dividends are expected to grow at a rate of 3% forever. If the company’s required return (rs) is 11%, what is its current stock price?

The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected...

The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 23% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 18% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Use intermediate calculations rounded to 4 decimal places. Round your answer to 2 decimal...

The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected...

The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 22% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 17% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) b....

The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected...

The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a constant rate of 10% per year forever. The stock has a beta of 1.25 and the risk- ree rate is 7%, while the expected rate of return of the whole market is 12%. a) What is the required rate of return on the Duo Growth stock b) What is your estimate of the intrinsic value of a share of the...

The Duo Growth Company just paid a dividend of $1.2 per share. The dividend is expected...

The Duo Growth Company just paid a dividend of $1.2 per share. The dividend is expected to grow at a rate of 24% per year for the next 3 years and then to level off to 6% per year forever. You think the appropriate market capitalization rate is 21% per year. a. What is your estimate of the intrinsic value of a share of the stock? b. If the market price of a share is equal to this intrinsic value,...

A company just paid a dividend of $1.95 per share, and that dividend is expected to...

A company just paid a dividend of $1.95 per share, and that dividend is expected to grow at a constant rate of 4.50% per year in the future. The company's beta is 1.65, the market risk premium is 8.5%, and the risk-free rate is 6.50%. What is the company's current stock price?

The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected...

The Jameson Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.75, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is Jameson's current stock price, P0?

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20%

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20% indefinitely. Stockholders require a rate of return of 11% on this stock. If the stock trades at a price of $16.7, what will your holding period return be if you buy it now and sell it after 2 years for the intrinsic value according to the constant growth dividend discount model?

Problem 1. The Duo Growth Company just paid a dividend of $1 per share. The dividend...

Problem 1. The Duo Growth Company just paid a dividend of $1 per share. The dividend is expected to grow at a rate of 25% for the next 3 years and then level off to 5% per year forever. You think the appropriate market capitalization rate is 20% per year. (3 pts.) What is your estimate of the intrinsic value of a share of stock? If the market price of a share is equal to this intrinsic value, what is...

Problem 1. The Duo Growth Company just paid a dividend of $1 per share. The dividend...

Subjects