Question
In: Finance
Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends....
Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends. It is expected by analysts that the firm's earnings will grow by 8.2% per year over next six years. After that, the earnings will most likely grow at the current industry average of 5.5% per year. Analysts do not expect any changes in the payout ratio of the firm. The cost of capital is 12%. The today’s share price is closest to (nearest cents):
Select one: a. $19.67 b. $21.30 c. $20.51 d. $23.12
Solutions
Expert Solution
Todays share price is closest to $21.30
Answer is choice (b)
Details of calculation as below:
jeff jeffy answered 1 year agoRelated Solutions
Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends....
Rocket Co. has just paid a dividend of $1.15 per share. The firm
pays annual dividends. It is expected by analysts that the firm's
earnings will grow by 8.2% per year over next six years. After
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(a) Consider a stock that pays annual dividends. It just paid
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year. The dividends are expected to remain constant at $4.50 per
share for the next 10 years, after which the dividends are expected
to decrease at a rate of 0.5% per year. The annual cost-of-capital
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(a) Consider a stock that pays annual dividends. It just paid $4.50 dividends per share, and...
(a) Consider a stock that pays
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next dividend will be paid in 1 year. The dividends are expected to
remain constant at $4.50 per share for the next 10 years, after
which the dividends are expected to decrease at a rate of 0.5% per
year. The annual cost-of-capital is 15.50%. Find the fair value of
the stock today.
(b) Consider the same stock as
described in part (a), except...
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