Question

In: Finance

Blasco just paid an annual dividend of $1.63 a share. What is one share of this...

Blasco just paid an annual dividend of $1.63 a share. What is one share of this stock worth to you if the dividends increase by 3 percent annually and you require a rate of return of 14 percent?

Solutions

Expert Solution

Information provided:

Annual dividend= $1.63

Dividend growth rate= 3%

Required rate of return= 14%

The stock price is calculated using the dividend discount model.

Price of the stock today=D1/(r-g)

where:

D1=next dividend payment

r=interest rate

g=firm’s expected growth rate

Price of the stock today= $1.63*(1 + 0.03)/ 0.14 – 0.03

                                             = $1.6789/ 0.11

                                             = $15.2627     $15.26.

In case of any query, kindly comment on the solution.

jeff jeffy answered 10 months ago
Next > < Previous

Related Solutions

SCI just paid a dividend (D0) of $12.16 per share, and its annual dividend is expected...
SCI just paid a dividend (D0) of $12.16 per share, and its annual dividend is expected to grow at a constant rate (g) of 4.50% per year. If the required return (r) on SCI's stock is 11.25%, then the intrinsic value of SCI's shares is[ Select ] ["$195.25", "$181.25", "$188.25"]         ?   If SCI's stock is in equilibrium, the current dividend yield on the stock will be [ Select ] ["8.75%", "7.75%", "6.75%"] per share? If SCI's stock is...
BBB company just paid their annual dividend of $1.20 per share. They are projecting dividends of...
BBB company just paid their annual dividend of $1.20 per share. They are projecting dividends of $1.50 and $1.80 over the next two years, respectively. After that, the dividend will increase by 3% every year. What is the amount you are willing to pay for one share of this stock if your required return is 10 percent?
A company just paid a $1.60 per share annual dividend. The company is planning on paying...
A company just paid a $1.60 per share annual dividend. The company is planning on paying $2.90, $3.05, $3.15, and $3.30 a share over the next 4 years, respectively. After that, the dividend will be a constant $3.35 per share per year. What is this stock worth to you per share if you require a 11.25% rate of return? Question 7 options: $26.06 $26.78 $27.51 $28.23 $28.95
A company just paid a $1.60 per share annual dividend. The company is planning on paying...
A company just paid a $1.60 per share annual dividend. The company is planning on paying $2.20, $2.35, $2.45, and $2.60 a share over the next 4 years, respectively. After that, the dividend will be a constant $2.65 per share per year. What is this stock worth to you per share if you require a 9.50% rate of return? $26.37 $27.05 $27.72 $28.40 $29.07
ABC, Inc. just paid an annual dividend (D0) of $1 per share on earnings of $2....
ABC, Inc. just paid an annual dividend (D0) of $1 per share on earnings of $2. You expect the firm’s dividends to grow at 20% over the next two years based on its expansion plans. After that you expect dividends to grow at the industry average of 7% per year. The riskfree rate is 3%, the market risk premium is 6%, and its beta is 1.2. Using CAPM, what is the discount rate used to calculate the intrinsic value? (in...
Dragon Trucking just paid its annual regular cash dividend of $4.04 a share, along with a...
Dragon Trucking just paid its annual regular cash dividend of $4.04 a share, along with a special dividend of $0.57 a share. The company follows a policy of increasing its dividend by 4.6 percent annually. Which one of the following is the best estimate of the firm's next annual dividend payment?
Southern Home Cookin' just paid its annual dividend of $0.65 a share. Dividends are expected to...
Southern Home Cookin' just paid its annual dividend of $0.65 a share. Dividends are expected to grow at 6% forever. The stock has a market price of $13 and a beta of 1.12. The return on the U.S. Treasury bill is 2.5 percent and the market risk premium is 6.8 percent. What is the cost of equity?
XYZ Corp. just paid an annual dividend of $3 per share on its common stock. This...
XYZ Corp. just paid an annual dividend of $3 per share on its common stock. This dividend is expected to grow at a 10% annual rate for two years, after which it is expected to grow at a 6% annual rate forever. If the required return is 10%, what value would you place on this stock?
ABC, Inc. just paid an annual dividend (D0) of $2 per share on earnings of $3....
ABC, Inc. just paid an annual dividend (D0) of $2 per share on earnings of $3. You expect the firm’s dividends to grow at 15% over the next two years based on its expansion plans. After that you expect dividends to grow at the industry average of 8% per year. The riskfree rate is 3%, the market risk premium is 5%, and its beta is 1.1, so the discount rate is 8.5%. What is the present value of the first...
A company just paid a dividend of $1.95 per share, and that dividend is expected to...
A company just paid a dividend of $1.95 per share, and that dividend is expected to grow at a constant rate of 4.50% per year in the future. The company's beta is 1.65, the market risk premium is 8.5%, and the risk-free rate is 6.50%. What is the company's current stock price?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT