You are forecasting a stock to pay the following dividends: $4.65 , $3.45 , $4. The...

You are forecasting a stock to pay the following dividends:
$4.65 , $3.45 , $4.

The dividends will then begin declining at a rate of 8.0% for the foreseeable future. What is the intrinsic value of this stock if the required return is 14%?

Expert Solution

Intrinsic Value of stock is $20.72
Statemnet showing Current Price
Particulars	Time	PVf 14%	Amount	PV
Cash inflows (Dividend)	1.00	0.8772	4.6500	4.08
Cash inflows (Dividend)	2.00	0.7695	3.4500	2.65
Cash inflows (Dividend)	3.00	0.6750	4.0000	2.70
Cash inflows (Price)	3.00	0.6750	16.7273	11.29
Current Price of Stock				20.72

P3= D4/ke-g
P3 = 4*.92/(14%-(-8%)
P3 = 3.68/(22%)
P3= 16.7273

jeff jeffy answered 1 year ago

A stock is expected to pay the following dividends: $1.10 in 4 years, $1.70 in 5...

A stock is expected to pay the following dividends: $1.10 in 4 years, $1.70 in 5 years, and $1.75 in 6 years, followed by growth in the dividend of 5% per year forever after that point. There will be no dividends prior to year 4. The stock's required return is 11%. The stock's current price should be $_________. * DO NOT ROUND INTERMEDIATE VALUES, NO CREDIT WILL BE GIVEN * FINAL ANSWER IN DOLLARS, ROUNDED TO TWO DECIMAL PLACES

Variable Dividend Stock is expected to pay dividends of $2, $,2, $,3, $4, and $4 over...

Variable Dividend Stock is expected to pay dividends of $2, $,2, $,3, $4, and $4 over the next five years. After that the dividend is expected to grow at a constant rate of 4%. If the return on the stock is 9%, what is the price? Use formulas and show step by step with calculations.

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?

If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR.

If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR. What is the discount rate? 2- If the dividends’ growth rate is 2%, and this stock pay current dividends (D0) of 2 SAR, discount rate is 4%. Calculate the value of this stock.

Q5. You are considering a call option on a stock that does not pay dividends. What...

Q5. You are considering a call option on a stock that does not pay dividends. What happens to a call option value if this stock starts paying dividends? Q6. A put option and a call option have the same maturity and strike price. If they also have the same price, which one is in-the-money?

You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 for each...

You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 for each of the next 3 years. After that, the dividends will grow at the sustainable growth rate until infinity. a. Calculate the sustainable growth rate assuming the company generates a rate of return of 20% on its equity and maintain a plowback ratio of 0.3. b. Assuming investors expect a 12% rate of return on the stock, what is the price of the stock today?

You expect a share of stock to pay dividends of $2.10, $2.35, and $2.60 in each...

You expect a share of stock to pay dividends of $2.10, $2.35, and $2.60 in each of the next 3 years. You believe the stock will sell for $33.00 at the end of the third year. a. What is the stock price if the discount rate for the stock is 20%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the dividend yield for year 1? (Do not round intermediate calculations. Enter your answer...

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2 years, and $1.8 in 3 years, followed by growth in the dividend of 7% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________. A stock is expected to pay the following dividends: $1.3 four years from now, $1.5 five years from now, and $1.8 six years from now, followed by...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2 years, and $2.0 in 3 years, followed by growth in the dividend of 5% per year forever after that point. The stock's required return is 12%. The stock's current price (Price at year 0) should be $____________.

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2...

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2 years, and $1.9 in 3 years, followed by growth in the dividend of 6% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________.

Question