Question

In: Finance

Sanford common stock is expected to pay $1.50 in dividends next​ year, and the market price...

Sanford common stock is expected to pay $1.50 in dividends next​ year, and the market price is projected to be $52.35 per share by​year-end. If investors require a rate of return of 13 percent, what is the current value of the​ stock?

Solutions

Expert Solution

Expected return = (Price at Y1 - Price at Y0)+Dividend/ Price at Y0)

Lets assume Price Y0 = X

Divindend = $1.5

Price at Y1 = $52.35

0.13 = (52.35-x)+1.5/x

0.13x = 52.35 - X+1.5

1.13x = 52.35+1.5

1.13x = 53.85

x = $47.6549

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A common stock is expected to pay no dividends during the next 7 quarters but at...
A common stock is expected to pay no dividends during the next 7 quarters but at the end of 6th quarter, it is expected to pay DPS of $1.0 and thereafter dividends are expected to be paid quarterly and into indefinite future. The quarterly growth rate of dividends stream is 1.0% and it is expected to stay the same into indefinite future. The required expected rate of return on the common stock is 12% per annum. Find: (i)The current price...
Glaham Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1)....
Glaham Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Glaham’s common stock is selling for $18.50 per share and issuance costs are $3.50 per share. What is Glaham’s cost of external equity? 20.59% 12.11% 14.00% 10.00%
Abacus Inc. issues common stock that is expected to pay a dividend $2.5 next year at...
Abacus Inc. issues common stock that is expected to pay a dividend $2.5 next year at a current price of $25 per share. If its expected dividend growth is 4%, what is Abacus's WACC, given it is financed by 20% debt with after-tax cost of debt 3.5% and the rest is financed with common equity? Tax rate is 35%. A. 13.5% B. 11.9% C. 11.5% D. 12.2% E. 14%
ABC, Company is expected to pay a dividends of $2.18 on their common stock. The company...
ABC, Company is expected to pay a dividends of $2.18 on their common stock. The company expects the growth rate to be 3.2% infinitely. If today's price of the stock is $72.57, what is the dividend yield?
Jacobson, Inc. has common stock with market price of $50 and expected to pay dividend of...
Jacobson, Inc. has common stock with market price of $50 and expected to pay dividend of $2.50 per share at the end of the year. You intend to purchase the stock at the market price, hold it for one year, and sell it after a dividend of $2.50 is paid. How much will the stock price have to appreciate for you to satisfy your required rate of return of 12 percent? You intend to purchase the stock today, hold it...
A security is expected to pay a dividend of $2.50 next year. In addition, dividends are...
A security is expected to pay a dividend of $2.50 next year. In addition, dividends are expected to grow at 4% per annum and investors have a 12% required rate of return. a. What will the dividends be in each year for the next 200 years? Set this up on an excel spreadsheet with the years going down a column using Excel. What is the present value of the above dividend stream ?  What is the sum of the dividends expected...
A stock will pay no dividends for the next 7 years. Then it will pay a...
A stock will pay no dividends for the next 7 years. Then it will pay a dividend of $9.62 growing at 4.31%. The discount rate is 11.34%. What should be the current stock price?
The market price of a stock is $32.19 and it is expected to pay a $4.07...
The market price of a stock is $32.19 and it is expected to pay a $4.07 dividend next year. The dividend is expected to grow at 2.95% forever. What is the required rate of return for the stock?
The market price of a stock is $21.98 and it is expected to pay a dividend...
The market price of a stock is $21.98 and it is expected to pay a dividend of $1.59 next year. The required rate of return is 11.86%. What is the expected growth rate of the dividend? Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))
The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow...
The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow at an annual rate of 7.90 percent for an indefinite number of years. a. If​ NCP's current market price is ​$22.93 per​ share, what is the​ stock's expected rate of​ return? b. If your required rate of return is 9.9 ​percent, what is the value of the stock for​ you? c. Should you make the​ investment?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT