If the expected dividend today is $2, and it is expected to grow 6% per annum thereafter

If the expected dividend today is $2, and it is expected to grow 6% per annum thereafter, what is the price of the stock if the appropriate discount rate is 15%?

Solutions

Expert Solution

Price of stock = D1 / (r - g)

Price of stock = $2 / (0.15 - 0.06)

Price of stock = $22.22

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

If the expected dividend today is $2, and it is expected to grow 6% per annum...

If the expected dividend today is $2, and it is expected to grow 6% per annum thereafter, what is the price of the stock if the appropriate discount rate is 15%?

A firm is expected to pay a dividend of $10 next year and afterwards dividends are expected to grow at 3% per annum in perpetuity.

A firm is expected to pay a dividend of $10 next year and afterwards dividends are expected to grow at 3% per annum in perpetuity. Assume the firm's required rate of return is 5%. a. What should be its stock price?b. A second firm that is expected to pay also a dividend of $10 next year has the same stock price as the first. However, after analyzing the financial statements of this second firm you realize that its dividends are likely...

Walmart has just paid an annual dividend of $3.22. Dividends are expected to grow by 8% for the next 4 years, and then grow by 2% thereafter

Walmart has just paid an annual dividend of $3.22. Dividends are expected to grow by 8% for the next 4 years, and then grow by 2% thereafter. Walmart has a required return of 11%.Part 1What is the expected dividend in four years?Part 2What is the terminal value in four years (P4P4)?Part 3What is the value of the stock now?

Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow...

Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 6% per year. The risk-free rate is 6%, and the expected return on the market portfolio is 12%. The stock has a beta of 0.86. a. Calculate the market capitalization rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Market capitalization rate. % b. What is the intrinsic value of the stock? (Do not...

The last dividend was $2. The dividend is expected to grow steadily at 8 percent. The...

The last dividend was $2. The dividend is expected to grow steadily at 8 percent. The required return is 16 percent. What is the price of the stock today? What is the dividend in 5 years, and the price in five years? If the stock is selling at $30, is it worth buying? Why?

Co. Shalom has just declared and paid dividend at GHC200 per share and this is expected to grow at 10% per annum forever. The current share price of v

Co. Shalom has just declared and paid dividend at GHC200 per share and this is expected to grow at 10% per annum forever. The current share price of the company is GH¢1,200. What is the company's cost of equity?a. 20.4%b. 16.5%c. 15.9%d. 28.3%

Trump Office Supplies paid a $6 dividend last year. The dividend is expected to grow at...

Trump Office Supplies paid a $6 dividend last year. The dividend is expected to grow at a constant rate of 8 percent over the next four years. The required rate of return is 14 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. (Do...

ABZ Corp. just paid a dividend of $1.00 per share. The dividend is expected to grow...

ABZ Corp. just paid a dividend of $1.00 per share. The dividend is expected to grow 6% per year in perpetuity. The stock's beta is 0.85. The risk-free rate is 3%, and the market risk premium is 7%. The current stock price is $37 per share. Assume that one year from now the stock will be correctly valued. What are the dividend yield, capital gain yield and expected return for the coming year? Draw the Security Market Line and plot the stock on...

MMM Co. just paid a dividend of $1.10 per share. The dividend is expected to grow...

MMM Co. just paid a dividend of $1.10 per share. The dividend is expected to grow by 30% next year, 90% in both Years 2 & 3, 20% in Year 4, and then grow at a constant rate of 4% thereafter. The required rate of return is 5%. Compute the selling price of the stock.

Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If...

Dividends are expected to grow at 1.7% rate indefinitely, and the last dividend was $6. If the relevant risk return is 5%, what would you be willing to pay for the stock. A) $120.000 B) S122.000 C) $181.818 D) $184.909 E) $ 5.811

Subjects