A fast growing firm paid a dividend of $1.00 per share during the most recent year. The dividend is expected to increase at arate of 20.0% per year for the next 3 years, Afterwards, a more stable 5.00% annual growth rate should be assumed - If a10.00% discount rate is appropriate for this stock, what is its value?$18.64$30.84$28.36$36.40

Solution:Gordon Growth Model (GGM) is the equity model which measures current price of share.For the…

Answered: A fast growing firm paid a dividend 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

See similar textbooks

Similar questions

ABC Company is growing very rapidly. It expects to pay a dividend of $2.35 per share at the end of this year. The dividend is then expected to grow at 18% for two years, then settle down to a long run growth rate of 8% per year each year thereafter. If investors require a 17% return to hold the common stock, what price per share would you expect to pay today? Select one: a. $30.81 b. $25.18 c. $23.48 d. $29.04 e. $28.06
A firm paid its annual dividend of $1.16 per share on its stock yesterday. The dividend is expected to grow at a constant rate of 1.07 percent per year into the foreseeable future. The expected rate of return on this stock is 9.47 percent. What is the value of one share of this stock today? O $1.28 $12.25 $13.81 O $13.96 $108.41
Use the Constant Dividend Growth Model to determine the expected annual growth rate of the dividend for ELO stock. The firm is expected to pay an annual divided of $8.9 per share in one year. ELO shares are currently trading for $144.48 on the NYSE, and the expected annual rate of return for ELO shares is 12.86%. Answer as a % to 2 decimal places (e.g., 12.34% as 12.34).
Proper steps so I can understand concept
What is the multi-stage DDM applied price of a stock that is expected to begin paying a $3 dividend 6 years from now. The firm is expected to grow dividends by 15% per year for the next four years after that, followed by a constant growth rate of 4% thereafter forever. Assume that investors require a rate of return of 16% for this firm's common shares. O $11.23 O $16.36 O $25.75 O $18.75
Assume Highline Company has just paid an annual dividend of $1.04. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.5% per year. If Highline's equity cost of capital is 8.1% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell? The value of Highline's stock is $. (Roun to the nearest cent.) Assume Highline Company has just paid an annual dividend of $1.04. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.5% per year. If Highline's equity cost of capital is 8.1% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of Highline's stock is $…
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
Give typing answer with explanation and conclusion A company is expected to maintain its dividend payout ratio of 70% in the long term. The earnings per share of the company are expected to be $1.575 next year. Earnings are expected to grow at a constant rate of 5% per year. The current risk-free rate is 1%, the implied equity risk premium is 7.0%, and the estimated beta of the firm is 2.10. If the firm is currently trading in the market at a P/E of 13.5, which of the following statements is correct A) firm correctly priced B) firm overvalued C) firm undervalued
The 5-year average P/E ratio for a firm is 20.00. This year 's earning per share is $5.00 and it is expected to at a constant growth rate of 6%. What is the projected stock price for the next year? А. S4 В. $104 C. S80.25 D. $94.33 E. $106
Dividends for ABC Corporation are expected to be $6 per share one year from today, $9 per share two years from today, and $10.50 per share three years from today. Thereafter, they are expected to grow by 4% per year. If investors demand a 14% rate of return, what is the price per share today? O $62.91 O $92.98 $37.16 O $79.79
Parcel Corporation expects to pay a dividend of $5.15 per share next year, and the dividend payout ratio is 50 percent. If dividends are expected to grow at a constant rate of 8 percent forever, and the required rate of return on the stock is 13 percent, calculate the present value of growth opportunities. Multiple Choice O O O $103.00 $79.23 $23.77 $71.85
Assume ABC Corp. pays the dividend of $4.50 this year. For the next 30 years, the firm's dividend will grow by 5.4%, then it will grow by 5.3% each year afterwards. The required rate of return for the firm's industry is 11.2%. What is the present value of the firm's stock under the Dividend Discount Model? O $65.38 O $81.48 $16.10 $89.24 L2

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS