Question

In: Finance

1. A company is expected to pay a dividend of $3.26 in the following period. If...

1. A company is expected to pay a dividend of $3.26 in the following period. If the expected growth rate of this dividend is 1.00% and the expected rate of return or discount rate for this stock is 2.00%, what is the current share price in dollars?

2.Which of the following statements is most likely FALSE?

A.we should use the general dividend discount model to value the stock of a firm with rapid or changing growth   B.the dividend discount model values the stock based on a forecast of the future dividends paid to shareholders   C.as firms mature, their growth slows to rates more typical of established companies

3.An analyst estimates the intrinsic value of a stock to be in the range $21.00 to $16.00. The current market price of the stock is $29.00. Assuming the analyst is correct, the current market price is:

A.fairly-valued   B.over-valued   C.under-valued

Solutions

Expert Solution

Dear Reader,

The question tests the dividend discount model.

In case of question two, more than one answer is probable based on various assumptions.

Happy Reading ✌️

Stay Safe!

jeff jeffy answered 1 year ago
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