Q:Forever 21 is expected to pay an annual dividend of $2.24 per share in one year,...

Q:Forever 21 is expected to pay an annual dividend of $2.24 per share in one year, which is then expected to grow by 8% per year. The required rate of return is 14%.

A:What is the current stock price?

B:What is the current stock price if the annual dividend of $2.24 has just been paid? (i.e. paid yesterday or earlier today)

C:What is the current stock price if the annual dividend of $2.24 his about to be paid? (i.e. paid tomorrow or later today)

Expert Solution

Dividends are the way of rewarding the share holders on the confidence they have kept on the Business, who thus have invested in the company.

Dividends are only made to shareholders those are recorded on the books of the company. A, investor must be on record as a shareholder by on that particular date known as the “record date” in order to receive a dividend.

The company also announces the last date when shares can be purchased to receive the dividend and this is termed as ex-dividend date. This date is generally one business day before the record date.

In stock market, there are numerous factors that affect the stock prices. Supply and demand plays a major role in the rise and fall of stock prices. And equally, there are certain investors who invest exclusively for the dividends and very seasonal. These situations might create artificial demand and thus effect the price of stock.

Payout date is the date after the record date. On the record and payout dates, there are no price adjustments made by the stock exchanges. These dates are mainly for administrative purposes and don't affect the value of the stock based on the dividend payout perspective. Based on this, to answer point B, there will not be any change affect on the stock price on this date, from dividend perpsective.

		$
	Annual Dividend per Share : DPS	2.24
	Required Rate of Return %	14%
	Perpetual Growth %	8%

Point A	Current Stock Price in $	37.33
	(DPS) / (Required Rate of Return%-Perpetual Growth%)

	Current Stock Price in $ (a)	37.33
	DPS (b)	2.24

Point C	Stock Price on Ex-Dividend date (a) - (b)	35.09

jeff jeffy answered 1 year ago

1. Forever 21 is expected to pay an annual dividend of $3.28 per share in one...

1. Forever 21 is expected to pay an annual dividend of $3.28 per share in one year, which is then expected to grow by 4% per year. The required rate of return is 14%. a. What is the current stock price? b. What is the current stock price if the annual dividend of $3.28 has just been paid? (i.e. paid yesterday or earlier today) c. What is the current stock price if the annual dividend of $3.28 his about to...

A company is expected to pay a dividend of $20 per share in one year (t=1),...

A company is expected to pay a dividend of $20 per share in one year (t=1), then $25 for 8 years after that (payments at t=2 ,3,...9), and on the 10th year (t=10) the dividend will be 2% less than at t=9, and will continue to shrink every year after that forever. The required return of the stock is 8%. All rates are effective annual rates. a) What is the price per share of the company's stock now? b) The...

Nazindil Inc. pays an annual dividend of $2.10 per share and is expected to pay this...

Nazindil Inc. pays an annual dividend of $2.10 per share and is expected to pay this amount indefinitely. Which of the following would be closest to its share price if the firm's equity cost of capital is 9%? Select one: $29.16 $23.33 $14 $18.66

A stock is expected to pay a dividend of $0.70 per share in one month, in...

A stock is expected to pay a dividend of $0.70 per share in one month, in four months and in seven months. The stock price is $30, and the risk-free rate of interest is 7% per annum with continuous compounding for all maturities. You have just taken a short position in an eight-month forward contract on the stock. Six months later, the price of the stock has become $34 and the risk-free rate of interest is still 7% per annum....

1.) FIN3100 is expected to pay a dividend of $3.00 per share one year from today....

1.) FIN3100 is expected to pay a dividend of $3.00 per share one year from today. FIN3100 required rate of return is rs = 7%. If the expected growth rate is 5%, at what price should the stock sell? B.)FIN3100 just paid a dividend of $6.00, i.e., D0 = $6.00. The dividend is expected to grow by 100% during Year 1, by 50% during Year 2, and then at a constant rate of 7% thereafter. If Silva's required rate of...

Future Motors is expected to pay an annual dividend next year of $3.10 a share.

Future Motors is expected to pay an annual dividend next year of $3.10 a share. Dividends are expected to increase by 1.85 percent annually. What is one share of this stock worth at a required rate of return of 15 percent? A) $24.01 B) $26.30 C)$24.56 ) $23.57 ) $24.59

Lumber Blocks is expected to pay an annual dividend of $1.00 a share this coming year....

Lumber Blocks is expected to pay an annual dividend of $1.00 a share this coming year. They are expected to increase their dividend by 50 percent per year for the following two years and then maintain a constant dividend growth rate of 4 percent per year. What is the value of this stock today if the required return is 14 percent? Select one: a. $22.05 b. $17.40 c. $19.34 d. $18.69

Dvorak Enterprises is expected to pay a stable dividend of $5 per share per year for...

Dvorak Enterprises is expected to pay a stable dividend of $5 per share per year for the next 10 years. After that, investors anticipate that the dividends will grow at a constant rate of 3.1 percent per year indefinitely. If the required rate of return on this stock is 10 percent, what is the fair market value of a share of Dvorak?

Tesla is expected to pay a dividend of $3 per share at the end of this...

Tesla is expected to pay a dividend of $3 per share at the end of this year; its beta is 0.9; the risk-free rate is 5.2%, and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 per share. What does the market believe will be the stock's price three years from now?

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...

Question