If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR.

If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR. What is the discount rate? 2- If the dividends’ growth rate is 2%, and this stock pay current dividends (D0) of 2 SAR, discount rate is 4%. Calculate the value of this stock.

Expert Solution

Discount rate = Dividend*(1+growth rate)/ Price + growth rate

= 2*(1+5%)/55+ 5%

= 3.818182%+ 5%

= 8.818182% rounded off to 8.82%

So, discount rate is 8.818182% rounded off to 8.82%.

Stock price = Dividend*(1+growth rate)/ (Discount rate-growth rate)

= 2*(1+2%)/(4%-2%)

= 2.04/ 2%

= SAR 102

So, the stock price is SAR 102.

So, discount rate is 8.818182% rounded off to 8.82%.

So, the stock price is SAR 102.

Umair answered 1 year ago

Q3. SAR company’s ordinary shares are expected to pay $1.8 per share in dividends in 2 years...

Q3. SAR company’s ordinary shares are expected to pay $1.8 per share in dividends in 2 years and after which the dividends are expected to grow at 2% annually forever. Company ABC's shares have a beta of 1.1. The long-term return of ASX200 is 9.4% and the return of T-bonds is 3.4 %. a.What is the expected return of SAR’s shares according to the CAPM? b.What is the implied price per share

A stock is expected to pay the following dividends: $1.10 in 4 years, $1.70 in 5...

A stock is expected to pay the following dividends: $1.10 in 4 years, $1.70 in 5 years, and $1.75 in 6 years, followed by growth in the dividend of 5% per year forever after that point. There will be no dividends prior to year 4. The stock's required return is 11%. The stock's current price should be $_________. * DO NOT ROUND INTERMEDIATE VALUES, NO CREDIT WILL BE GIVEN * FINAL ANSWER IN DOLLARS, ROUNDED TO TWO DECIMAL PLACES

Sanford common stock is expected to pay $1.50 in dividends next year, and the market price...

Sanford common stock is expected to pay $1.50 in dividends next year, and the market price is projected to be $52.35 per share byyear-end. If investors require a rate of return of 13 percent, what is the current value of the stock?

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2 years, and $1.8 in 3 years, followed by growth in the dividend of 7% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________. A stock is expected to pay the following dividends: $1.3 four years from now, $1.5 five years from now, and $1.8 six years from now, followed by...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2 years, and $2.0 in 3 years, followed by growth in the dividend of 5% per year forever after that point. The stock's required return is 12%. The stock's current price (Price at year 0) should be $____________.

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2...

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2 years, and $1.9 in 3 years, followed by growth in the dividend of 6% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________.

5. Growth Company's current share price is $20.10, and it is expected to pay a $0.95...

5. Growth Company's current share price is $20.10, and it is expected to pay a $0.95 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 3.9% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.30, what is Growth Company's cost of preferred stock?...

Variable Dividend Stock is expected to pay dividends of $2, $,2, $,3, $4, and $4 over...

Variable Dividend Stock is expected to pay dividends of $2, $,2, $,3, $4, and $4 over the next five years. After that the dividend is expected to grow at a constant rate of 4%. If the return on the stock is 9%, what is the price? Use formulas and show step by step with calculations.

Malmentier SA stock is currently priced at $55, and it does not pay dividends. The instantaneous...

Malmentier SA stock is currently priced at $55, and it does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of Malmentier SA stock is 40%. You want to purchase a put option on this stock with an exercise price of $60 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold __________ shares of stock per 100 put options to hedge your risk. 36 40 75 80

How do you calculate the expected dividend growth rate and future dividends?

Question