Question

In: Finance

23. Best Value Outlet recently announced that it intends to pay dividends of $0.40, $0.60, $0.75,...

23. Best Value Outlet recently announced that it intends to pay dividends of $0.40, $0.60, $0.75, and $1.00 per share over the next four years, respectively. After that, the plan is to increase the dividend by 3.5 percent annually. What is the current value of this stock if the applicable discount rate is 13.5 percent?

A. $6.44 B. $7.83 C. $8.17 D. $9.55 E. $13.10

24. The Shoe Box will not pay a dividend for the next two years. The following two years, it will pay annual dividends of $1 per share. Starting in year 5, the dividends will increase by 4 percent annually. The discount rate is 8 percent. What is the value of this stock today?
A. $18.18

B. $20.64 C. $22.63 D. $24.08 E. $27.09

Solutions

Expert Solution

Solution :

23 . The current value of stock of Best Value Outlet is = $ 8.17

Thus the Solution is Option C. $ 8.17

24.  The value of stock of Shoe Box today is = $ 20.64

Thus the Solution is Option B . $ 20.64

Please find the attached screenshots of the excel sheet containing the detailed calculation for the solution.


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