Question
In: Accounting
Today’s dividend (year 0) is 0.286. Assume dividend will grow at 32% for three years, then...
Today’s dividend (year 0) is 0.286. Assume dividend will grow at 32% for three years, then
13% afterwards. The required rate of return is 13%. What is the stock price today using the
dividend growth model?
Solutions
Expert Solution
This problem will be solved using Multistage Dividend Growth Models. In this method present value of dividend expected during the high growth period to the present value of the constant growth value of the firm at the end of the high growth period.
ekkarill92 answered 1 year agoRelated Solutions
Assume that dividends in the next three years (starting from year 2017) will grow at a...
Assume that dividends in the next three years (starting from
year 2017) will grow at a rate of 13% annually. Further, it is
assumed that dividends will grow at a rate of 11% for the next four
years (year 4 to 7). Thereafter it is assumed that the company will
grow at a constant growth rate of 7% per annum. The last dividend
paid (for 2016) is $1.52. Assume a required rate of return of
12%.
Clearly show the following:...
A share is expected to pay a dividend of $2 in 1 year and $3 in 2 years. Then the dividend will grow at 8% p.a. until the end of year 4.
A share is expected to pay a dividend of $2 in 1 year and $3 in 2 years. Then the dividend will grow at 8% p.a. until the end of year 4. After that, the growth rate would become 3% p.a. forever. The rate of return is 11% p.a. effective. Using the dividend discount model (DDM), calculate the value of the share today. (Round your answer to the nearest cent.)
A common stock has just paid a dividend of $2.18/share. The dividend is expected to grow by 5.62% per year for 18 years.
A common stock has just paid a dividend of $2.18/share. The dividend is expected to grow by 5.62% per year for 18 years. After that the dividends will stay constant in perpetuity. The required rate of return on the stock is 16%. What should the price of the stock be today?
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1? Today’s Dividend $3.37 Discount Rate 7.62% Growth
rate in dividends 0 to 1 9.44% Growth rate in dividends 1 to 2
9.11% Growth rate in dividends 2 to 3 5.42% Growth rate in
dividends 3 onward 3.91%
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1?
Today’s Dividend
$3.85
Discount Rate
7.57%
Growth rate in dividends 0 to 1
7.26%
Growth rate in dividends 1 to 2
9.85%
Growth rate in dividends 2 to 3
9.19%
Growth rate in dividends 3 onward
3.36%
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1? Today’s Dividend $3.11 Discount Rate 7.66% Growth
rate in dividends 0 to 1 7.89% Growth rate in dividends 1 to 2
8.38% Growth rate in dividends 2 to 3 9.29% Growth rate in
dividends 3 onward 4.14%
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1?
Today’s Dividend
$3.23
Discount Rate
5.43%
Growth rate in dividends 0 to 1
8.10%
Growth rate in dividends 1 to 2
8.64%
Growth rate in dividends 2 to 3
6.97%
Growth rate in dividends 3 onward
4.41%
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1?
Today’s Dividend
$3.51
Discount Rate
7.54%
Growth rate in dividends 0 to 1
8.57%
Growth rate in dividends 1 to 2
8.57%
Growth rate in dividends 2 to 3
5.33%
Growth rate in dividends 3 onward
3.12%
Given the information in the table, what is the dividend yield from t=0 to t=1? Today’s...
Given the information in the table, what is the dividend yield
from t=0 to t=1?
Today’s Dividend $3.42
Discount Rate 7.62%
Growth rate in dividends 0 to : 6.27%
Growth rate in dividends 1 to 2: 9.85%
Growth rate in dividends 2 to 3: 5.10%
Growth rate in dividends 3 onward: 4.60%
Assume ABC Corp. pays the dividend of $4.55 this year. For the next 30 years, the...
Assume ABC Corp. pays the dividend of $4.55 this year. For the
next 30 years, the firm's dividend will grow by 5.4%, then will
grow by 4.7% each year afterwards. The required rate of return for
the firm's industry is 10.8%. What is the present value of the
firm's stock under the Dividend Discount Model?
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