A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5 percent over the last 15 years and you expect this to continue, if the required rate of return on the stock is 12 percent, what is its fair present value and if the required rate of return on the stock is 15 percent, what should the fair value be four years from today?

A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant rate of 1.5 percent over the last 15 years and you expect this to continue, if the required rate of return on the stock is 12 percent, what is its fair present value and if the required rate of return on the stock is 15 percent, what should the fair value be four years from today?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

What would be the price of a stock that pays an annual fixed dividend of $1 for ten years, and then the dividend payment increases by 1% every year, and the required rate of return is 5% annually?
(Common stock valuation) The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow at an annual rate of 9.50 percent for an indefinite number of years. a. If your required rate of return is 11.60 percent, what is the value of the stock for you? b. Should you make the investment? a. If your required rate of return is 11.60 percent, the value of the stock for you is $ (Round to the nearest cent.)
You intend to buy Berrymore Inc.’s common stock at $100 per share, hold it one year and sell after that. The firm paid a $5 per share dividend last year and its dividends are expected to grow at an annual rate of 7% for indefinite number of years. If you can sell the stock at $110, what is your expected rate of return?
What value would be placed on a stock that currently pays no dividend but is expected to start paying a $1 dividend five years from now? Once the stock starts paying dividends, the dividend is expected to grow at a 5 percent annual rate. The appropriate discount rate is 12 percent. A) $14.29. (B) $8.11. C) $9.08.
You are investing in a share of stock. The share just paid a dividend of $7.46. The dividend has been growing and is expected to grow forever at a rate of 5.26% per year. You require a 12.89% rate of return on the stock investment. What would be a fair price/share in 8 years? (Answer to nearest $0.01)
Harry Edward's stock currently sells for $20 a share. The stock just paid a dividend of $1.00 a share (ie D0=$1.00). The dividend is expected to grow at a constant rate of 10 percent a year. a) What is the required rate of return on the company's stock? b) What stock price is expected 1 year from now?
(Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an annual rate of 8.00 percent for an indefinite number of years. a. If your required rate of return is 10.50 percent, what is the value of the stock for you? b. Should you make the investment? a. If your required rate of return is 10.50 percent, the value of the stock for you is $ nearest cent.) (Round to the
Gen Lab is expected to pay out a dividend of $0.75 per share in one year. The expected stock price in one year is $42 per share and the required return on the stock (also known as the cost of equity or the equity cost of capital) is 12%. What is the value of the stock today? Round your answer to two decimal places. Your Answer:
a. The current price of a stock is $65 and you plan to sell it in two years. If dividends are expected to be $1 per share for the next couple of years, and the required return is 10%, what should the price of the stock be when you sell it? b. You believe that a corporation's dividends will grow 5 percent on average into the foreseeable future. If the price of the stock is $50, what should be its yearly dividend payment assuming a 12 percent required return?
LIFECORP, will pay a dividend of $5.10 per share next year. The company pledges to increase its dividend by 4.20 percent per year indefinitely. If you expected a return of 11.90 percent on your investment, how much should you pay for the company's stock today?
You have just purchased a share of stock for $21.73. The company is expected to pay a dividend of $0.62 per share in exactly one year. If you want to earn a 10.5% return on your investment, what price do you need if you expect to sell the share immediately after it pays the dividend? The price one year from now should be $ nearest cent.) (Round to the
A stock is expected to pay $1.25 per share every year indefinitely and the required return for the company is 8.4%. What price would an investor be expected to pay per share ten years in the future?