A company paid a $1.55 per share-per-year dividend last year. It is expected to increase at an annual 8% growth rateto year five. After year five, the dividend will grow at 7% per year indefinitely. Suppose that the required rate of return is10%.DO $1.551st Growth 8%2nd Growth 7%Required Rate 10%What is the value of the stock?The value of the stock is $. Round your answer to the nearest two decimal places.

To find the value of the stock, we can use the Dividend Discount Model (DDM) considering two phases…

Answered: A company paid a $1.55 per…

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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1. XYZ Corporation is currently paying a dividend of $1.5 per share and is expected to increase this dividend by 10% per year for the next two year. After this, dividends are expected to grow at a stable rate of 4% annually. If the required rate of return on the stock is 8%, what is the current value of a share? A. $40.00 B. $42.25 C. $47.19 D. $43.62 2. JW Corporation is expected to pay a dividend of $1.80 per share next year. After that, dividends are expected to grow by 3% annually indefinitely. The current stock price is $30.00. If your required rate of return is 10%, should you purchase the stock today? Why or why not? A. No; The stock has a present value of $31.50 per share. B. Yes; The stock has a present value of $31.50 per share. C. No; The stock has a present value of $25.71 per share. D. Yes; The stock has a present value of $25.71 per share. E. No; The stock has a present value of $36.00 per share.
(a) Stock A just distributed a dividend of $4. It is expected that the company will increase its dividend by 18% in the coming year, 15% in the second year and 10% in the third year. After the third year, the company will maintain the dividend growth rate at 8% forever. How much would Stock A be worth today if its yearly required rate of return is 15%?
1. (a) StockAjust distributed a dividend of $4. It is expected that the company will increase its dividend by 18% in the coming year, 15% in the second year and 109% in the third year. After the third year, the company will maintain the dividend growth rate at 8% forever. How much would Stock A be worth today if its yearly required rate of return is 15%?. 2. (b) Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of Year 1? [Hint: think of PO = D1/ (R-
● Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and ● the required return is 20%, what is the price of the stock? Remember that we have to find the PV of all expected future dividends. 7-22
Assume that Stock X is fairly priced today. Stock X just distributed a per share dividend of $1. It is expected that the company will increase its dividend by 20% in the coming year, 15% in the second year, 10% in the third year, and 5% in the fourth year. Starting from the fifth year, the company will maintain the dividend growth rate to be 5% per year forever. How much is Stock X worth today if its equity cost of capital is 10%? With clear calculation and formula
Consider the stock of BIC Company has an annual dividend of $3 in the last year. The dividend is expected to grow at a constant rate of 7 percent permanently. The market requires a 11 percent return on the company. What is the current price of a share of the stock?
A firm’s stock is selling for $19.50. Just recently they paid a $3 dividend and dividends are expected to grow at 5% per year. What is the required return? a. 10.50% b. 16.15% c. 1.044% d. 15.79%
Suppose company Becker inc. has just paid a quarterly dividend of $2 per share, as it has for the previous 3 quarters. The management plans on raising this dividend by 3.6% per year indefinitely. If the required return on this stock is 10%, what is the current share price?
Answer in excel format and explain formulas used.
Please answer as soon as possible Successful Albert Ltd’s last dividend was $3.55. The company expects to grow at a constant rate of 5%. Your required rate of return on such shares is 6.5%. a. Find the current market value of this share. b. What is the expected dividends in year 5? c. What is the price of the share 8 years from now? d. If the company expect no growth in the near future, what is the maximum price you would be willing to pay?
Suppose Barclay Corp is expected to pay a dividend of $2.50 at the end of the year. f the company and its dividends are growing at a relatively constant rate of 3.5% and Investors required return on the stock is 10.2%, what is the value of the stock? O$37.31 O $24.47 O$25.37 O $24.51 O$38.62 Page 13 of 30 Previous Page Next Page 0gf30.guestions.saved.

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