Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 29 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next 3 years, with the growth rate falling off to a constant 8 percent thereafter.

If the required return is 15 percent and the company just paid a $3.60 dividend. what is the current share price?

Solutions

Expert Solution

Answer - Share price Today = $92.04726546 or $92.05

Explaination -

Here we have applied dividend discounting model to find out the share price Today. Here we discount the value of all the cash inflow we are expected to receive in future and bring them at present value to find the share price Today

4th year onwards means at the beginning of 4th year or at the end of their year. As it's the value of share at the end of third year the Discounting Factor used for it is 3rd year factor, which is added up with the present value of initial 3 years present value of dividend to find share price Today.

4th year onwards we have used Gordon's Growth model formula which is -

Divided expected at the end of 4th year ÷ ( required return - growth rate )

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent, and the company just paid a dividend of $3.85, what is the current share price?

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent and the company just paid a $1.50 dividend. what is the current share price? Multiple Choice $48.12 $50.08 $44.43 $47.06 $49.10

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 27 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 27 percent for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 14 percent and the company just paid a $2.20 dividend. what is the current share price? Multiple Choice $54.72 $51.68 $49.01 $53.62 $55.81

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 4.31 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 4.31 percent for the next three years, with the growth rate falling off to a constant 6.96 percent thereafter. If the required return is 9.95 percent and the company just paid a dividend of $7.19, what is the current share price?

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent...

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next 3 years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 9 percent and the company just paid a $2.80 dividend. what is the current share price? Multiple Choice $146.30 $152.27 $149.29 $145.36 $137.83

Janicex co is growing quickly. dividends are expected to grow at a rate of 20 percent...

Janicex co is growing quickly. dividends are expected to grow at a rate of 20 percent for the next three years, with growth rate falling off to a constant 5 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $2.50, what is the current share price?

Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for...

Marcel Co. is growing quickly. Dividends are expected to grow at a 21 percent rate for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter. Required: If the required return is 12 percent and the company just paid a $3.80 dividend. what is the current share price? (Do not round your intermediate calculations.) Answer choices: $86.91 $77.51 $83.50 $85.21 $80.42

Jet Co. is growing quickly. Dividends are expected to grow at a 18 percent rate for...

Jet Co. is growing quickly. Dividends are expected to grow at a 18 percent rate for the next 3 years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent and the company just paid a $3.60 dividend, what is the current share price?

Bruin Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent...

Bruin Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling of to a constant 5 percent thereafter. If the required return is 15 percent and the company just paid a $7.16 dividend, what is the share price at the end of supernormal growth (at Year 3)? a. 146.84 b. 97.89 c. 75.18 d. 139.84 e. 93.23 Please show solutions using Excel

Marcel Co. is growing quickly. Dividends are expected to grow at a 19 percent rate for...

Marcel Co. is growing quickly. Dividends are expected to grow at a 19 percent rate for the next 3 years, with the growth rate falling off to a constant 7 percent thereafter. Required: If the required return is 12 percent and the company just paid a $1.90 dividend. what is the current share price? Options $49.99 $56.32 $52.93 $55.21 $54.11

Subjects