ABC, Inc. just paid an annual dividend (D0) of $2 per share on earnings of $3....

ABC, Inc. just paid an annual dividend (D0) of $2 per share on earnings of $3. You expect the firm’s dividends to grow at 15% over the next two years based on its expansion plans. After that you expect dividends to grow at the industry average of 8% per year. The riskfree rate is 3%, the market risk premium is 5%, and its beta is 1.1, so the discount rate is 8.5%. What is the present value of the first 2 dividends? (use 2 decimal places without $, so $10.00 is 10.00) with all the steps and formula

Expert Solution

jeff jeffy answered 2 years ago

ABC, Inc. just paid an annual dividend (D0) of $1 per share on earnings of $2....

ABC, Inc. just paid an annual dividend (D0) of $1 per share on earnings of $2. You expect the firm’s dividends to grow at 20% over the next two years based on its expansion plans. After that you expect dividends to grow at the industry average of 7% per year. The riskfree rate is 3%, the market risk premium is 6%, and its beta is 1.2. Using CAPM, what is the discount rate used to calculate the intrinsic value? (in...

A company has just paid a dividend of $ 3 per share, D0=$ 3 . It...

A company has just paid a dividend of $ 3 per share, D0=$ 3 . It is estimated that the company's dividend will grow at a rate of 18 % percent per year for the next 2 years, then the dividend will grow at a constant rate of 5 % thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the...

A company has just paid a dividend of $ 2 per share, D0=$ 2 . It...

A company has just paid a dividend of $ 2 per share, D0=$ 2 . It is estimated that the company's dividend will grow at a rate of 18 % percent per year for the next 2 years, then the dividend will grow at a constant rate of 7 % thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the...

SCI just paid a dividend (D0) of $12.16 per share, and its annual dividend is expected...

SCI just paid a dividend (D0) of $12.16 per share, and its annual dividend is expected to grow at a constant rate (g) of 4.50% per year. If the required return (r) on SCI's stock is 11.25%, then the intrinsic value of SCI's shares is[ Select ] ["$195.25", "$181.25", "$188.25"] ? If SCI's stock is in equilibrium, the current dividend yield on the stock will be [ Select ] ["8.75%", "7.75%", "6.75%"] per share? If SCI's stock is...

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is...

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 7% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

National Advertising just paid a dividend of D0 = $0.75 per share, and that dividend is...

National Advertising just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.35, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

DB company just paid a dividend of $ D0 per share. It is estimated that the...

DB company just paid a dividend of $ D0 per share. It is estimated that the company's dividend will grow at a rate of 10 percent per year for the next 2 years, then the dividend is expected to grow at constant rate of 6 percent thereafter. You are also given that DB stock’s has beta of 1.2, and the expected market rate of return is 11% and the risk-free rate is 6%. Based on this, the current price of...

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...

Hall & Marks just paid a $1.90 per share dividend yesterday.(that is, D0 = $1.90). The...

Hall & Marks just paid a $1.90 per share dividend yesterday.(that is, D0 = $1.90). The dividend is expected to grow at a constant rate of 3% a year. The required rate of return on the stock, rs, is 14%. What is the stock's current value per share?

Question