Question

In: Finance

Find the price for a stock given that the next dividend is $2.38 per share, the...

Find the price for a stock given that the next dividend is $2.38 per share, the required return is 9.6%, and the growth rate in dividends is 1.3% per year.

Solutions

Expert Solution

Ans $ 28.67

P0 = Price of Share
D1 = Current Dividend
Ke = Cost of Equity
g = growth rate
P0 = D1 / (Ke - g)
P0 = 2.38 / (9.6%- 1.3%)
P0 = 28.67

Related Solutions

A stock expects to pay a dividend of $3.72 per share next year. The dividend is...
A stock expects to pay a dividend of $3.72 per share next year. The dividend is expected to grow at 25 percent per year for three years followed by a constant dividend growth rate of 4 percent per year in perpetuity. What is the expected stock price per share 5 years from today, if the required return is 12 percent?
A stock sells for $40. The next dividend will be $4 per share. If the rate...
A stock sells for $40. The next dividend will be $4 per share. If the rate of return earned on reinvested funds is 15% and the company reinvests 60% of earnings in the firm, what is the expected rate of return on the stock?
A share of Lash Inc.'s common stock just paid a dividend of $2.38. If the expected...
A share of Lash Inc.'s common stock just paid a dividend of $2.38. If the expected long-run growth rate for this stock is 4%, and if investors' required rate of return is 11%, what is the stock price?
A stock is selling for $40 per share currently. The next dividend will be $1 per share, and will grow at 12% per year forever.
A stock is selling for $40 per share currently. The next dividend will be $1 per share, and will grow at 12% per year forever. What is the rate of return required by investors? Answer: 14.5%
A stock has a current value of $94 per share. The stock price next period will...
A stock has a current value of $94 per share. The stock price next period will be an increase of 15% or a decrease of 10% and the one period risk-free rate is 4%. What is the value of a one period call option on the stock with a strike price of $90? (2 points) What is the value of a one period put option on the stick with a strike price of $90? (2 points)
A stock is expected to pay a dividend of $2.74 per share next year, $3.2 two...
A stock is expected to pay a dividend of $2.74 per share next year, $3.2 two years from now, and $3.38 three years from now. After that, the dividend is expected to grow at a constant rate of 5% per year indefinitely. The required return on the stock is 9%. The estimated price per share is $___________. Rounding and Formatting: Do not enter a dollar sign in your response. Round your answer to 2 decimal places. Example: If your answer...
A stock will pay an annual dividend next year of $5 per share. Dividends will grow...
A stock will pay an annual dividend next year of $5 per share. Dividends will grow at 30% for the following 2 years and then at 5% thereafter. What is V0 if K=0.1?
The current price of MB Industries stock is $20 per share. In the next year the...
The current price of MB Industries stock is $20 per share. In the next year the stock price will either go up to $24 per share or go down to $16 per share. MB pays no dividends. The one year risk-free rate is 5 percent and will remain constant. Using the one-step binomial pricing model, what is the price of a one-year CALL option on MB stock with a strike price of $20 (out to two decimal places)?
Suppose a stock had an initial price of $77 per share, paid a dividend of $1.55...
Suppose a stock had an initial price of $77 per share, paid a dividend of $1.55 per share during the year, and had an ending share price of $83. Compute the percentage total return. Multiple Choice 9.81% 9.10% 10.91% 10.30% 9.31%
Suppose a stock had an initial price of $32 per share, paid a dividend of $2.44...
Suppose a stock had an initial price of $32 per share, paid a dividend of $2.44 per share during the year, and had an ending share price of $29. Compute the percentage total return. Enter the answer in 4 decimals e.g. 0.1234. Calculate the arithmetic average of the following returns. Year Return 1 0.27 2 0.13 3   -0.11 4   -0.09 5 0.08 Enter the answer with 4 decimals, e.g. 0.1234.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT