52-Week Price Div PE Net Lo Stock (Div) Yld % Ratio Chg Hi 77.40 10.43 Palm Coal .36 2.6 6 13.90 -.24 Lake Lead Grp 55.81 33.42 3.8 10 40.43 -.01 130.94 69.55 SIR 2.05 2.3 10 88.98 3.07 50.24 13.95 DR Dime.80 5.2 6 15.43 -.26 35.00 20.74 Candy Galore .32 1.5 28 ?? .18 According to your research, the growth rate in dividends for SIR for the next five years is expected to be 20 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.25 percent indefinitely. Assume investors require a return of 12 percent on SIR stock. According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1.54 Close Price

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
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You've collected the following information from your favorite financial website.
52-Week Price
Div
PE
Close
Net
Hi
Lo
Yld %
Ratio
Price
Chg
Stock (Div)
Palm Coal .36
77.40
10.43
2.6
6
13.90
-.24
Lake Lead Grp
55.81
33.42
3.8
10
40.43
-.01
130.94
69.55
SIR 2.05
2.3 10
88.98
3.07
50.24
13.95
DR Dime .80
5.2
6
15.43
-.26
35.00
20.74 Candy Galore .32 1.5 28
??
.18
According to your research, the growth rate in dividends for SIR for the next five years is
expected to be 20 percent. Suppose SIR meets this growth rate in dividends for the next
five years and then the dividend growth rate falls to 5.25 percent indefinitely. Assume
investors require a return of 12 percent on SIR stock.
According to the dividend growth model, what should the stock price be today? (Do not
round intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
X Answer is complete but not entirely correct.
Current stock price $ 21.33 X
1.54
Transcribed Image Text:You've collected the following information from your favorite financial website. 52-Week Price Div PE Close Net Hi Lo Yld % Ratio Price Chg Stock (Div) Palm Coal .36 77.40 10.43 2.6 6 13.90 -.24 Lake Lead Grp 55.81 33.42 3.8 10 40.43 -.01 130.94 69.55 SIR 2.05 2.3 10 88.98 3.07 50.24 13.95 DR Dime .80 5.2 6 15.43 -.26 35.00 20.74 Candy Galore .32 1.5 28 ?? .18 According to your research, the growth rate in dividends for SIR for the next five years is expected to be 20 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.25 percent indefinitely. Assume investors require a return of 12 percent on SIR stock. According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) X Answer is complete but not entirely correct. Current stock price $ 21.33 X 1.54
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