A stock is expected to pay its first annual dividend in 3 years. The dividend is expected to stay constant at $1.7 per year for 22 years and then grow at 5% annually forever. The required rate of return is 12%. (hint: non-standard dividends; two-stage of dividends) What is the PV today of the first-stage dividends? (22 years of constant $1.7 dividend per year is the first stage) What is the PV today of the second-stage dividends? (dividends after the 22 years of constant dividend is the second stage) What should be the stock price now?

A stock is expected to pay its first annual dividend in 3 years. The dividend is expected to stay constant at $1.7 per year for 22 years and then grow at 5% annually forever. The required rate of return is 12%. (hint: non-standard dividends; two-stage of dividends) What is the PV today of the first-stage dividends? (22 years of constant $1.7 dividend per year is the first stage) What is the PV today of the second-stage dividends? (dividends after the 22 years of constant dividend is the second stage) What should be the stock price now?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 18MC

See similar textbooks

Similar questions

A stock is expected to pay its first annual dividend in 5 years. The dividend is expected to stay constant at $1.2 per year for 20 years and then grow at 5% annually forever. The required rate of return is 13%. (hint: non-standard dividends; two-stage of dividends) A. What is the PV today of the first-stage dividends? (20 years of constant $1.2 dividend per year is the first stage)? B. What is the PV today of the second-stage dividends? (dividends after the 20 years of constant dividend is the second stage)? C. What should be the stock price now?
A stock is expected to pay its first annual dividend in 3 years. The dividend is expected to stay constant at $1.4 per year for 18 years and then grow at 5% annually forever. The required rate of return is 14%. (hint: non-standard dividends; two-stage of dividends) Part 1 What is the PV today of the first-stage dividends? (18 years of constant $1.4 dividend per year is the first stage) Part 2 What is the PV today of the second-stage dividends? (dividends after the 18 years of constant dividend is the second stage) Part 3 What should be the stock price now?
A common stock will pay a cash dividend of $4.25 next year. After that, the dividends are expected to increase indefinitely at 4% per year. If the discount rate is 14%, what is the PV of the stream of dividend payments? Note: Round your answer to 2 decimal places. Present Value
A common stock will pay a cash dividend of $4 next year. After that, the dividends are expected to increase indefinitely at 2% per year. If the discount rate is 13%, what is the PV of the stream of dividend payments? (Round your answer to 2 decimal places.)
Consider the following two stocks: Stock A is expected to provide a dividend of $10 for 15 years. After that, the dividend will grow at a rate of 2% forever. Stock B is expected to pay a dividend of $5 next year. Thereafter, dividend growth is expected to be 3% per 20 years and zero therafter. If the rate r at which dividends are discountd is r= 9%, which stock is the most valuable? What if the capitalization rate is 6%
A stock has an expected annual return of 7.06% and is expected to pay annual dividends forever. The first annual dividend is expected in 1 year and all subsequent annual dividends are expected to grow at a constant rate of 2.73% per year. The dividend expected in 1 year from today is expected to be $67.46. What is the present value (as of today) of the dividend that is expected to be paid in 6 years from today? O $52.66 (plus or minus 2 cents) O $77.18 (plus or minus 2 cents) O $51.26 (plus or minus 2 cents) O $54.88 (plus or minus 2 cents) O the answer cannot be obtained based on the given information
A stock will pay a dividend next quarter of $1.00. If the expected return is 10% per year, compounded annually, what is the price of the stock? Suppose a stock will pay $0 for the next 4 years, and then pay $1 every quarter after that. The required return is 10% per year, compounded annually. What is the price of the stock? Suppose a stock will pay $0.50, $1.00, $1.50, $2.00 and then grow at 4% per year compounded quarterly. The required return is 10% per year compounded annually. What is the price of the stock?
20) A firm will start paying dividends 5 years from now and thereafter that will be expected to grow 5.4 % into perpetuity. The expected dividend in year 5 is $16.3. If an investor's required rate of return is 13.2 %, what is the intrinsic value of the stock?
A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it should continue to grow at a constant rate of 8% a year. If its required return is 14%, what is the stock's expected price 4 years from today? Round your answer to two decimal places. Do not round your intermediate calculations.
Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. i) Compute the current stock price for Whizcom Inc.ii) What would be the likely stock price in year 5?iii) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
A company will pay a dividend of $3.28 per share next year. The dividends are expected to grow at 3.75 percent per year indefinitely. You require a return of 10 percent on your investment. How much will you pay for the company’s stock today? What is the stock’s dividend yield (Hint: dividend yield is a stock’s dividend divided by its price)? What will the price be in a year? What is the implied return given the change in price over the one-year period from today? Please use a HP 10bii+ Financial Calculator
A firm will pay a dividend of $1.05 next year. The dividend is expected to grow at a constant rate of 3.42% forever and the required rate of return is 13.83%. What is the value of the stock?