Holtzman Clothiers's stock currently sells for $40 a share. It just paid a dividend of $3.5...

Holtzman Clothiers's stock currently sells for $40 a share. It just paid a dividend of $3.5 a share (i.e., D0 = $3.5). The dividend is expected to grow at a constant rate of 4% a year.

a. What stock price is expected 1 year from now?

b. What is the required rate of return?

Solutions

Expert Solution

P0 = 40 , g = 4%

a : Stock price expected 1 year from now = P1 = P0*(1+ g) = 40*(1+ 0.04) = 41.60

---------------------

b : D0 = 3.5 , g = 4% , P0 = 40

D1 = D0*(1+g) = 3.5*(1+0.04) = 3.64

ke = D1/P0 + g = 3.64/40 + 0.04 = 0.131 = 13.10%

-----------------

Answers : 41.60 , 13.10% [Thumbs up please]

--------------------

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Holtzman Clothiers's stock currently sells for $40 a share. Itjust paid a dividend of $3.5...

Holtzman Clothiers's stock currently sells for $40 a share. It just paid a dividend of $3.5 a share (i.e., D0 = $3.5). The dividend is expected to grow at a constant rate of 4% a year.a. What stock price is expected 1 year from now?b. What is the required rate of return?

- Holtzman Clothiers's stock currently sells for $39.00 a share. It just paid a dividend of...

- Holtzman Clothiers's stock currently sells for $39.00 a share. It just paid a dividend of $1.00 a share (i.e., D0 = $1.00). The dividend is expected to grow at a constant rate of 10% a year. What stock price is expected 1 year from now? What is the required rate of return? - Carnes Cosmetics Co.'s stock price is $35, and it recently paid a $2.00 dividend. This dividend is expected to grow by 21% for the next 3...

Holtzman Clothiers's stock currently sells for $27.00 a share. It just paid a dividend of $2.00...

Holtzman Clothiers's stock currently sells for $27.00 a share. It just paid a dividend of $2.00 a share (i.e., D0 = $2.00). The dividend is expected to grow at a constant rate of 8% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent. $ What is the required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %

Holtzman Clothiers's stock currently sells for $40.00 a share. It just paid a dividend of $3.00...

Holtzman Clothiers's stock currently sells for $40.00 a share. It just paid a dividend of $3.00 a share (i.e., D0 = $3.00). The dividend is expected to grow at a constant rate of 10% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. % Holt Enterprises recently paid a dividend, D0,...

Holtzman Clothiers's stock currently sells for $38 a share. It just paid a dividend of $3.75...

Holtzman Clothiers's stock currently sells for $38 a share. It just paid a dividend of $3.75 a share (i.e., D0 = $3.75). The dividend is expected to grow at a constant rate of 5% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ 39.9 What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations. (Please show work)

Holtzman Clothiers's stock currently sells for $36 a share. It just paid a dividend of $2.25...

Holtzman Clothiers's stock currently sells for $36 a share. It just paid a dividend of $2.25 a share (i.e., D0 = $2.25). The dividend is expected to grow at a constant rate of 4% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations. % Holt Enterprises recently paid a dividend,...

Woidtke Manufacturing's stock currently sells for $25 a share. The stock just paid a dividend of...

Woidtke Manufacturing's stock currently sells for $25 a share. The stock just paid a dividend of $1.20 a share (i.e., D0 = $1.20), and the dividend is expected to grow forever at a constant rate of 9% a year. What stock price is expected 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is the estimated required rate of return on Woidtke's stock? Do not round intermediate calculations. Round the answer...

Woidtke Manufacturing's stock currently sells for $27 a share. The stock just paid a dividend of...

Woidtke Manufacturing's stock currently sells for $27 a share. The stock just paid a dividend of $3.00 a share (i.e., D0 = $3.00), and the dividend is expected to grow forever at a constant rate of 4% a year. What stock price is expected 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent. What is the estimated required rate of return on Woidtke's stock? Do not round intermediate calculations. Round the answer to...

Woidtke Manufacturing's stock currently sells for $26 a share. The stock just paid a dividend of...

Woidtke Manufacturing's stock currently sells for $26 a share. The stock just paid a dividend of $2.75 a share (i.e., D0 = $2.75), and the dividend is expected to grow forever at a constant rate of 9% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent. What is the estimated required rate of return on Woidtke's stock? Do not round intermediate calculations. Round the answer to three decimal places. (Assume the...

1.Columbus Manufacturing's stock currently sells for $ 29.10 a share. The stock just paid a dividend...

1.Columbus Manufacturing's stock currently sells for $ 29.10 a share. The stock just paid a dividend of $3.50 a share (i.e.,D0). The dividend is expected to grow at a constant rate of 4 % a year. What stock price is expected one year from now (P1)? Round your answer to two decimal places. 2.Columbus Manufacturing's stock currently sells for $ 23.81 a share. The stock just paid a dividend of $2 a share (i.e.,D0=2). The dividend is expected to grow...

Subjects