Question
In: Finance
You're analyzing the stock of a certain company. The most recent dividend paid was $9 dollars...
You're analyzing the stock of a certain company. The most recent dividend paid was $9 dollars per share. The company's discount rate is 11%, and the firm is expected to grow at 3% per year forever. What should be the stock price today?
Solutions
Expert Solution
| Calculation of the current price of the stock | ||||||
| P1 = Current Stock Price = | ? | |||||
| D0 = Current Dividend = | $ 9.00 | |||||
| G = Growth = | 3.00% | or = | $ 0.03 | |||
| cost of Equity = Ke = | 11.00% | or = | $ 0.11 | |||
| P1 = D1 / Ke - g | ||||||
| D1 = | D0 | X | Growth rate | |||
| D1 = | $ 9.00 | X | $ 1.03 | |||
| D1 = | $ 9.27 | |||||
| P1 = | D1 | "/" By | Ke | |||
| P1 = | $ 9.27 | "/" By | $ 0.11 | |||
| P1 = | $ 84.27 | |||||
| Answer = Stock Price of the Today = | $ 84.27 | |||||
jeff jeffy answered 2 years agoRelated Solutions
For the most recent year, GHI Company paid an annual dividend of $1.00. The company expects...
For the most recent year, GHI Company paid an annual dividend of
$1.00. The company expects dividends to grow by 15% for the next
two years, followed by 4 years of growth at 10% per year, before
dropping to a perpetual growth rate of 4% starting in year 7. The
required return is 12%.
What is the intrinsic value per share of GHI stock?
a) In 2012 Kabir Inc paid $1.25 as dividend. In the most recent dividend in 2019...
a) In 2012 Kabir Inc paid $1.25 as dividend. In the most recent
dividend in 2019 the dividend was $1.80. The number of
years between these two dividends (n) is 7 years. If the required
return of 12.21%. What is the current stock price if we anticipate
dividends stopping in 10 years (because the company will go
bankrupt)? B) if the company pays the dividends forever (does not
go bankrupt) what is the current stock price?
You are analyzing a company's stock for a possible purchase. They just paid a dividend of...
You are analyzing a company's stock for a possible purchase.
They just paid a dividend of $1.75, yesterday. You expect the
dividend to grow at the rate of 7% per year for the next three
years; if you buy the stock, you plan to hold it for 3 years and
then sell it.
The stock has a required return of 12%.
The stock will sell in three years at a price of $29.16
1.What dividends do you expect for...
Consider a stock that most recently paid a dividend of $0.75. The company plans to increase...
Consider a stock that most recently paid a dividend of $0.75.
The company plans to increase dividends by 50% each year for the
next 3 years, then by 20% each year for 4 years, and then level off
to a permanent growth rate in dividends of 6%. If the actual stock
price today is $100, what is the implied required rate of
return
Consider a stock that most recently paid a dividend of $0.75. The company plans to increase...
Consider a stock that most recently paid a dividend of $0.75.
The company plans to increase dividends by 50% each year for the
next 3 years, then by 20% each year for 4 years, and then level off
to a permanent growth rate in dividends of 6%. If the required
return for this stock is 11%, what is the value of the stock
today?
Consider a stock that most recently paid a dividend of $0.75. The company plans to increase...
Consider a stock that most recently paid a dividend of $0.75.
The company plans to increase dividends by 50% each year for the
next 3 years, then by 20% each year for 4 years, and then level off
to a permanent growth rate in dividends of 6%. If the actual stock
price today is $100, what is the implied required rate of
return?
Compute the value of a share of common stock of a company whose most recent dividend...
Compute the value of a share of common stock of a company whose
most recent dividend was $2.00 and is expected to grow at 6 percent
per year for the next 2 years, after which the dividend growth rate
will decrease to 3 percent per year indefinitely. Assume a 12
percent required rate of return.
Two Analysts are independently analyzing the value of Knight, Inc. stock. Knight paid a dividend of...
Two Analysts are independently analyzing the value of Knight,
Inc. stock. Knight paid a dividend of $1 last year. Analyst A
expects the dividend to grow by 10% in each of the next three
years, after which it will grow at a constant rate of 4% per year.
Analyst B also expects a temporary growth rate of 10% followed by a
constant growth rate of 4%, but he expects the supernormal growth
to last for only two years. Analyst A...
You are analyzing Jillian’s Jewelry (JJ) stock for a possible purchase. JJ just paid a dividend...
You are analyzing Jillian’s Jewelry (JJ) stock for a possible
purchase. JJ just paid a dividend of $1.25 yesterday. You
expect the dividend to grow at the rate of 6% per year for the next
3 years; if you buy the stock, you plan to hold it for 3 years and
then sell it.
What dividends do you expect for JJ stock over the next 3 years?
In other words, calculate D1, D2 and
D3. Note that D0 = $1.25....
A random sample of the closing stock prices in dollars for a company in a recent...
A random sample of the closing stock prices in dollars for a
company in a recent year is listed below. Assume that
σ is $2.36.
Construct the 90% and 99% confidence intervals for the
population mean. Interpret the results and compare the widths of
the confidence intervals.
22.34
17.02
21.44
16.52
22.13
20.58
19.08
16.08
16.09
19.24
19.58
22.67
17.62
19.96
15.18
21.32
The 90% confidence interval is ($ ? , $ ?)
(Round to two decimal places as needed.)...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- what is the best way to increase return on investment from social-media marketing?
- A digital computer has a memory unit with 32 bits per word. The instruction set consists...
- Im in a java class and having trouble with assigning the seat to a specific number...
- Compare the file storage of two types of cell phones, such as an iPhone and an...
- What is a data dictionary? How is it useful and to whom? When should you consider...
- Consider that you are 35 years old and have just changed to a new job. You...
- "Gambling Greg" Assignment Outcomes: Demonstrate the ability to create and use structs Demonstrate the ability to...
ADVERTISEMENT