Question

In: Finance

Fey Fashions expects the following dividend pattern over the next seven​ years: Year 1 Year 2...

Fey Fashions expects the following dividend pattern over the next seven​ years:

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

​$1.00

​$1.10

​$1.21

​$1.33

​$1.46

​$1.61

​$1.77

The company will then have a constant dividend of ​$2.00 forever. What is the​ stock's price today if an investor wants to earn

a. 17​%? $_______ (Round to the nearest​ cent.)

b. 22​%? $_______ (Round to the nearest​ cent.)

Solutions

Expert Solution

we have to calculate here present value of all dividends and present value of P7. so we will get P0


Related Solutions

G-2 Inc. expects the following dividend pattern over the next seven​ years: Year 1- $1.50 Year...
G-2 Inc. expects the following dividend pattern over the next seven​ years: Year 1- $1.50 Year 2 - $1.56 Year 3 - $1.62 Year 4 - $1.68 Year 5- $1.75 Year 6 - $1.82 Year 7 ​- $1.90 The company will then have a constant dividend of ​$ 1.97 forever. What is the price of this stock today​ (year 0) if an investor wants to earn 16​% rate of​ return? The stock price is ​$_____   ​(Round to two decimal​ places.)
1) IBM expects to pay a dividend of $5 next year and expects these dividends to...
1) IBM expects to pay a dividend of $5 next year and expects these dividends to grow at 77​% a year. The price of IBM is $85 per share. What is​ IBM's cost of equity ​capital? 2) Since your first​ birthday, your grandparents have been depositing $1,200into a savings account on every one of your birthdays. The account pays 9​% interest annually. Immediately after your grandparents make the deposit on your 18th​ birthday, the amount of money in your savings...
Suppose a firm will pay a $2 dividend next year and expects to increase dividends by...
Suppose a firm will pay a $2 dividend next year and expects to increase dividends by 20%, 15%, and 10% over the following three years. After that, dividends will increase at a rate of 5% per year indefinitely. If the required return is 17%, what is the price of the stock today? Group of answer choices $19.21 $21.50 $18.80 $22.14 $20.98
Suppose a firm will pay a $2 dividend next year and expects to increase dividends by...
Suppose a firm will pay a $2 dividend next year and expects to increase dividends by 20%, 15%, and 10% over the following three years. After that, dividends will increase at a rate of 5% per year indefinitely. If the required return is 17%, what is the price of the stock today? Group of answer choices $22.14 $18.80 $19.21 $21.50 $20.98
Emma Incorporated expects non-normal dividend growth over the next three years; that is a 0% growth...
Emma Incorporated expects non-normal dividend growth over the next three years; that is a 0% growth rate in the first year, then 25%, and then 12% followed by growth of 8% thereafter. If the last dividend paid was $2.50 and the appropriate discount rate is 12%; what is the price of the stock today? $67.26 $94.50 $76.64 $74.24
XYZ has the following dividend forecast for the next three years: Year 1 2 3 Expected...
XYZ has the following dividend forecast for the next three years: Year 1 2 3 Expected Dividend $1.00 2.00 2.50 After the third year, the dividend will grow at a constant rate of 5 percent per year. The required return is 10 percent. What is the value of the stock today?
A stock expects to pay a dividend of $3.72 per share next year. The dividend is...
A stock expects to pay a dividend of $3.72 per share next year. The dividend is expected to grow at 25 percent per year for three years followed by a constant dividend growth rate of 4 percent per year in perpetuity. What is the expected stock price per share 5 years from today, if the required return is 12 percent?
Your company expects cash flows of $4,000 per week over the next 2 years
Your company expects cash flows of $4,000 per week over the next 2 years. Calculate the present value of these cash flows if the discount rate provided to you by your accountant is 11%.
A manufacturing company expects a steady 2% annual growth in profits over the next three years....
A manufacturing company expects a steady 2% annual growth in profits over the next three years. The company wants to invest the profits at a 10% interest rate. Expected annual profit of the company in year one is $1,000. How much will be accumulated by the company by the end of the third year?
1. Manchester’s expects to need £8m over the next five years to fund a range of...
1. Manchester’s expects to need £8m over the next five years to fund a range of projects set out in its corporate plan. It is proposing to do this by issuing more long-term fixed interest stock on which it would currently have to pay 3.5% per annum interest. (a) Discuss the possible advantages and disadvantages of raising the £8m in one sum now rather than spread over the next five years according to when funds will be required.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT