Stephens Supply Company (SSC) is growing rapidly. SSC currently pays no dividend, but expects to pay...

Stephens Supply Company (SSC) is growing rapidly. SSC currently pays no dividend, but expects to pay its first dividend two years from today. SSC expects to maintain its current growth rate of 25% annually for the next three years (1 year after beginning to pay dividends), after which SSC expects the growth rate to decrease to 5% annually. If the appropriate discount rate is 12%, then what is the amount of the first dividend that SSC expects to pay? Assume $ 60 price (**need step by step process from start to finish (in excel if possible))

Solutions

Expert Solution

Amount of the first dividend that SSC expects to pay is $2.94

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Stephens Supply Company (SSC) is growing rapidly. Assume Today’s stock price is $60. SSC currently pays...

Stephens Supply Company (SSC) is growing rapidly. Assume Today’s stock price is $60. SSC currently pays no dividend but expects to pay its first dividend two years from today. SSC expects to maintain its current growth rate of 25% annually for the next three years (1 year after beginning to pay dividends), after which SSC expects the growth rate to decrease to 5% annually. If the appropriate discount rate is 12%, then what is the amount of the first dividend...

Stephens Stock Company (SSC) expects to generate free cash flows of $50 million, 60 million and...

Stephens Stock Company (SSC) expects to generate free cash flows of $50 million, 60 million and 65 million over the next three years after which SSC expects free cash flows to grow at 3% per year. SSC has a cost of capital of 15%, excess cash of $20 million and debt of $100 million. What is SSC’s enterprise value? If SSC has 20 million shares of stock outstanding, then what is the value of a share of SSC stock?

A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is...

A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is expected to be 12% for the next 6 years. The dividend growth rate after the first 6 years is expected to be 3% annually. The expected return on the market is 8%, the risk free rate is 3% and the firm’s Beta is 25. Calculate the estimated price (intrinsic value) for a share of this firm’s stock. What does this firm’s Beta measure? Use...

Buckstars Inc. is a rapidly growing exotic herb company. The firm expects to pay its first...

Buckstars Inc. is a rapidly growing exotic herb company. The firm expects to pay its first dividend of $3.60 per share 4 years from today and management then expects to grow the dividend at 29% for 3 years. As competition enters the market, dividend growth after that will drop to 5% forever. If the appropriate discount rate is 10%, what is the share price today? Solve in excel and round your final answer to 2 decimal places.

3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate...

3. A rapidly growing firm is currently paying a dividend of $4.00. The dividend growth rate is expected to be 8% for the next 3 years. The dividend growth rate after the first 3 years is expected to be 2% annually. The expected return on the market is 7%, the risk free rate is 3% and the firm’s Beta is 1.20. a. Calculate the estimated price (intrinsic value) for a share of this firm’s stock. b. What does this firm’s...

Company XYZ does not currently pay a dividend. However, their earnings have been growing at a...

Company XYZ does not currently pay a dividend. However, their earnings have been growing at a very high rate. Thus, they are expected to begin paying a dividend, starting 7 years from today. Expectations are that the first dividend will be $ 2.0 per share. The dividend is then expected to grow at 20 % per year for 6 years, and at the end of that super-normal growth period, the stock will enter a slower growth perpetuity phase of 8...

Company ABC currently pays $5 dividend. Dividends have been growing at a 3% annual rate and...

Company ABC currently pays $5 dividend. Dividends have been growing at a 3% annual rate and are expected to continue growing with same rate for the foreseeable future. What is the current value of this stock if the required rate of return is 18%?

A rapidly growing company just paid a dividend of $1.50 a share. For the next three...

A rapidly growing company just paid a dividend of $1.50 a share. For the next three years, the earnings growth rate is projected to be 15% each year, and then 4% each year thereafter. If the required rate of return is 9%, what is the value of the stock? A)$35.15 B)$38.63 C)$43.88 D)$41.65

New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend...

New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend of $5.50 per share exactly 7 years from today. After that, the dividends are expected to grow at 3.5 percent forever. If the required return is 12.5 percent, what is the price of the stock today? $35.17 $61.11 $26.79 $30.14 $49.71

What is the value of a company that expects to pay a dividend of $1.12 next...

What is the value of a company that expects to pay a dividend of $1.12 next year, where dividends will grow at 17% for the next 2 years before leveling off to a constant 2% growth forever. The required rate of return is 9%. Please provide answer in excel format.

Subjects