5- Compute the value of a share of common stock of Lexi's Cookie Companywhose most recent dividend was $2.50 and is expected to grow at 3 percent peryear for the next 5 years, after which the dividend growth rate will increase to6 percent per year indefinitely. Assume a 10 percent required rate of return.Store and acce:documents froLearn More>>DesktopLin-

The share price is the current market price of the share. It is the price of the share at any…

Answered: 5- Compute the value of a share of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Use the two-stage dividend growth model to value a stock, using the following information: The cost of equity is 13% (1) Dividends have been growing at an annual rate of 10% for the last five years and assume this growth rate will continue through the next 5 years, which is the first stage. The last dividend paid was $2.00. Calculate the expected dividend each year for years 1 - 5 and their present values. (2) Suppose that after year 5, the dividends are expected to grow at 2.5% (second-stage growth rate) per year, indefinitely. (3) Calculate today's stock price based on the above information.
Stag Corp. will pay dividends of $ 4.75, $5.25, $5.75, and $7 for the next four years. Thereafter, the company expects 7 percent growth - | n dividends. If the required rate of returnis 15 percent, what is the current market price of the stock?
Current Attempt in Progress Crane Corporation will pay dividends of $2.60, $2.90, and $3.15 in the next three years. After three years, the dividends are expected to grow at a constant rate of 6 percent per year. If the required rate of return is 13.0 percent, what is the current value of the Crane common stock? (Round intermediate calculations and final answer to 2 decimal places, e.g. 52.75.) Current value of the common stock tA $
How much would you be prepared to pay for a share in 2 years’ time that pays a $1.5 dividend each year constantly ? Assume the required rate of return is expected to remain constant at 9.1% per year.
Vijay
9. CEPS Group announced today that it will begin paying annual dividends next year. The firstdividend will be OMR 0.65 a share. The following dividends will be OMR 0.72, OMR 0.85,OMR 0.89, and OMR 0.95 a share annually for the following 4 years, respectively. After that,dividends are projected to increase by 4 percent per year. How much are you willing to pay tobuy one share of this stock today if your desired rate of return is 11.5 percent? notes: show all calculation
4. The dividends that Firm A pays to its stockholders are expected to grow at 18% a year for the next nine years. From t=9 onwards, the growth rate in dividends will drop to 13.5% per year, and the firm expects to be able to sustain it at this level. Assuming that the market capitalization rate is 18% a year, work out the value of the firm assuming that the dividend expected to be paid at t=1 is $4.50.
Compute the value of a share of common stock of a company whose most recent dividend was $5.00 and is expected to grow at 1.5 percent per year for the next 5 years, after which the dividend growth rate will increase to 3 percent per year indefinitely. Assume 15 percent required rate of return.
News Corp is expected to pay a dividend of $0.8 in one year. The dividend is expected to grow at 12% in the following 3 years and then at a constant rate of 4% per annum indefinitely. If the required rate of return is 12%, what is the price of the company's share today? Please illustrate your answer using a timeline.
2. Intel just paid an annual dividend of $2 a share. Management estimates the dividend will increase by 10 percent a year for the next two years. After that, the dividend growth rate is estimated at 5 percent. The required rate of return is 12 percent. What is the value of this stock today?
Suppose you have come up with the following dividend forecasts for the next three years. After the third year, the dividend will grow at a constant rate of 10% per year and the interest rate is 15% year expected dividend 1 $1 2 $2 3 $4 Calculate the dividends in year 4 (D4) calcu;ate the price in year 3
Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the price expected to be in year 4? O a. $10 O b. $50.50 O c. $41.6 O d. $40 You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond? Select one:

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