Question

In: Finance

Burkhardt Corp. pays a constant $15.25 dividend on its stock. The company will maintain this dividend...

Burkhardt Corp. pays a constant $15.25 dividend on its stock. The company will maintain this dividend for the next 9 years and will then cease paying dividends forever. If the required return on this stock is 9.2 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

The price of any financial instrument is the PV of the future cash flows. The future dividends ofthis stock are an annuity for 9 years, so the price of the stock is the PV of the annuity, which will be:

Current share price = $15.25 / (1.092) + $15.25 / (1.092)2 + $15.25 / (1.092)3 + $15.25 / (1.092)4 + $15.25 / (1.092)5 + $15.25 / (1.092)6 + $15.25 / (1.092)7 + $15.25 / (1.092)8 + $15.25 / (1.092)9

Current share price = $90.69

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Burnett Corp. pays a constant $7.85 dividend on its stock. The company will maintain this dividend...
Burnett Corp. pays a constant $7.85 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. If the required return on this stock is 9 percent, what is the current share price?
Burnett Corp. pays a constant $7.85 dividend on its stock. The company will maintain this dividend...
Burnett Corp. pays a constant $7.85 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. If the required return on this stock is 9 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Burnett Corp. pays a constant $23 dividend on its stock. The company will maintain this dividend...
Burnett Corp. pays a constant $23 dividend on its stock. The company will maintain this dividend for the next 6 years and will then cease paying dividends forever.    If the required return on this stock is 6 percent, what is the current share price? Multiple Choice $113.10 $118.75 $138.00 $119.88 $110.84
Burnett Corp. pays a constant $20 dividend on its stock. The company will maintain this dividend...
Burnett Corp. pays a constant $20 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever.If the required return on this stock is 6 percent, what is the current share price? $167.68 $177.74 $164.32 $240.00 $176.06
Estes Park Corp. pays a constant $1.43 dividend on its stock. The company will maintain this...
Estes Park Corp. pays a constant $1.43 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 9.59 percent, what is the current share price?
Gruber Corp. pays a $9 dividend on its stock. The company will maintain this dividend for...
Gruber Corp. pays a $9 dividend on its stock. The company will maintain this dividend for the next 3 years. In year 4, the dividend will increase to $10 and then grow at a constant 5 percent rate annually into perpetuity. If the required return on this stock is 10 percent, what is the current share price?
Crabtree corp. pays a constant $8.60 divident on its stock. The company will maintain this divident...
Crabtree corp. pays a constant $8.60 divident on its stock. The company will maintain this divident for the next 11 years and will then cease paying dividends forever. The requird return on this stock is 11 percent. What is the current share price?
a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in...
a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6 percent per year indefinitely. If the required return on this stock is 12 percent, what is the current share price? b. Now suppose the company in (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.80 per share, as it has...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The...
XYZ company presently pays a dividend of $ 1.50 per share on its common stock. The company expects to increase the dividend at a 20% annual rate the first four years and at the rate of 13% at the next four years then the growth on the dividend at a 7% thereafter. This phased growth patterns is in keeping with the expected life cycle of earnings. You are required a 16% return to invest in this stock. What value should...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT