A company follows a dividend policy that raises dividends annually at a rate of 4%(and expects this rate to go forever). The company just paid an annual dividend of$2.11. The required rate of return is 15%.What is today's stock price?For your answer round to the nearest 2 decimals. Do not use the $ sign in youranswer. For example, if the answer is $3.237 enter your answer as 3.24; Do notenter it as $3.237, $3.2, 3.2, or 3.237

Now, substitute the given values into the formula: P0=…

Answered: A company follows a dividend policy…

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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Similar questions

The Dahlia Flower Company has earnings of $1.48 per share. a. If the benchmark PE for the company is 15, how much will you pay for the stock? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. If the benchmark PE for the company is 18, how much will you pay for the stock? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Stock price b. Stock price
Jersey Medical earns $9.00 a share, sells for $100, and pays a $7 per share dividend. The stock is split two for one and a $3.5 per share cash dividend is declared. What will be the new price of the stock? Round your answer to the nearest dollar. $ If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place. Payout ratio before the split: % Payout ratio after the split: %
XYZ Inc., has an odd dividend policy. The company has just paid a dividend of $11.00 per share and has announced that it will increase the dividend by $9.00 per share for each of the next four years, and then never pay another dividend. If you require a return of 16 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
A company recently paid a $1.35 dividend. The annual dividend is expected to grow at a 18.5 percent rate. At a current stock price of $40.85, what return are shareholders expecting? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places. (e.g., 32.16))
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3, and its current price is $100. A. What is its nominal annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places. B. What is its effective annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places.
Ellington Electronics wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $3.70 per share, and the current price of its common stock is $76 per share. The expected growth rate is 7 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Compute the cost of retained earnings (Ke). Cost of retained earnings % b. If a $7.0 flotation cost is involved, compute the cost of new common stock (Kn). Cost of new common stock %
The answer to B is incorrect. Does the dividend yield need to be factored in?
Jersey Medical earns $12.50 a share, sells for $100, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared. a. What will be the new price of the stock? Round your answer to the nearest dollar. $ b. If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place. Payout ratio before the split: Payout ratio after the split: % %
Jersey Medical earns $10.00 a share, sells for $80, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared. What will be the new price of the stock? Round your answer to the nearest dollar. $ If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place. Payout ratio before the split: % Payout ratio after the split: %

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