a. Last year, Lagenda paid a dividend of RM0.065. The dividend growth is expected to be 5.1% next year. From year 2 through year 5, 7.3% growth is expected. In year 6 and thereafter, dividend growth is constant at 4.7% per year. Calculate the maximum price that you should pay for Lagenda stock today. b. The most recent dividend paid by Sime Darby Property was RM0.01 per share. The company's dividends are expected to grow at 3.4% per year for the coming year. From year 2 to year 5, their dividends are forecasted to increase by 3% per year, after which they are expected to grow at 3.5% per year indefinitely. How much is the present value of a share of Sime Darby Property? c. Will you purchase Lagenda and Sime Darby property stocks if their current share prices are RM1.35 and RM0.56 per share, respectively? Why?

a. Last year, Lagenda paid a dividend of RM0.065. The dividend growth is expected to be 5.1% next year. From year 2 through year 5, 7.3% growth is expected. In year 6 and thereafter, dividend growth is constant at 4.7% per year. Calculate the maximum price that you should pay for Lagenda stock today. b. The most recent dividend paid by Sime Darby Property was RM0.01 per share. The company's dividends are expected to grow at 3.4% per year for the coming year. From year 2 to year 5, their dividends are forecasted to increase by 3% per year, after which they are expected to grow at 3.5% per year indefinitely. How much is the present value of a share of Sime Darby Property? c. Will you purchase Lagenda and Sime Darby property stocks if their current share prices are RM1.35 and RM0.56 per share, respectively? Why?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40. After year 2, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 9%. The stock should be worth _______ today. Select one: a. $79.63 b. $73.21 c. $67.32 d. $73.37
Backyard Company is expected to pay a dividend of $L4 per share in the coming year. The required rate of return on the share is equal to 12% and dividends are expected to grow at the rate of 4% per year. Calculate the current value (price) of the stock. Note: Include two decimal points in your answer. Answer: Give your reasons
keli bhd stock is expected to pay a year-dividend of rm2.10 in the coming year. the dividends are expected to grow at 5 percent per year and the required rate of return is 13 percent. using the dividend valuation model, find the intrinsic value of the company’s common stock
Assume that you are considering purchase of common stock issued by REC Corporation. Your research has shown that the dividends are paid regularly on a semiannual schedule. The most recent (past) semiannual dividend paid was D0 = $12 per share. In the future, dividends are expected to grow at an annual rate of 4%. You have determined that your required rate of return (discount rate) for this stock would be 6.5% per year. NOTE: $12 is the amount that was paid semiannually. It does not need to be divided by two. Based on this information, answer the following: A. What are the next four upcoming dividends for this common stock (i.e., D1, D2, D3, D4)? B. Using the Discounted Cash Flow Method, what is the value of this common stock? C. Assume that the current market price of this common stock is $325 per share. At this price, what is the stock's annual expected return according to the Discounted Cash Flow Method? D. Based on your answer to part B, would you invest in…
Additional Activities Perform what is being asked in the following: 1. What will you pay today for a stock that is expected to make a P 45.00 dividend in one year if the expected dividend rate is 5% and you require a 12% return on your investment? 2. XYZ Company's preferred stock is selling for P 60.00 a share. If the required return is 8%, what will the dividend be two years from now? 3. Your broker is trying to sell you a stock with a current market price of P 2,160.00 The stock's last dividend was P 53.25, and earnings and dividends are expected to increase at a constant growth rate of 10%. Is the stock fairly valued if the return is 13%? Explain why or why not.
AirMas Airlines will pay a RM4 dividend next year on its common stock, which is currently selling at RM100 per share. What is the market required rate of return on this investment if the dividend is expected to grow at 5 percent forever? Select one: A. 4 percent B. 7 percent C. 9 percent D. 5 percent
Tresnan Brothers is expected to pay a $1.60 per share dividend at the end of the year (i.e., D1 = $1.60). The dividend is expected to grow at a constant rate of 9% a year. The required rate of return on the stock, rs, is 17%. What is the stock's current value per share? Round your answer to the nearest cent. $ ______ Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $106.00, but flotation costs will be 7% of the market price, so the net price will be $98.58 per share. What is the cost of the preferred stock, including flotation? Round your answer to two decimal places. ________ %
The investment banking firm of Stan Inc. will use a dividend valuation model to appraise the shares of the DB Corporation. Dividends (D) at the end of the current year will be P1.20. The growth rate (g) is 9% and the discount rate (K) is 13%?
Kakuzi Ltd. reported EPS of Shs. 4 in the last financial period. The earnings are expected to grow at the rate of 10% p.a. for 6 years. The price earnings ratio (PIE) of the company at the end of the 6th year period is 20. The required rate of return is 15%. Calculate the theoretical value of this share for an investor who intends to hold on to the shares for 6 years. The dividend payout ratio is 60%.
Mclver's Meals, Inc. currently pays a OMR2 annual dividend. Investors believe that dividends will grow at 20% next year, 12% annually for the two years after that, and 6% annually thereafter. Assume the required return is 10%. What is the current market price of the stock? Select one: O a. OMR69.30 O b.OMR75.20 O c. OMR66.60 O d. OMR60.80 O e. OMR54.99
Lily’s Show is expected to pay an annual dividend of RM0.80 a share next year. The market price of the stock is RM22.40 and the growth rate is 5 percent. Calculate the firm's cost of equity. Positif Corporation has paid annual dividends of RM1.16, RM1.20, RM1.25, RM1.10, and RM0.95 over the past five years respectively. Calculate the average dividend growth rate?
ABC Company is expected to pay $2.80 per share dividend at the end of the year (D1 = $2.80). The dividend is expected to grow at a constant rate of 5% per year. The required rate of return on the stock, rs is 9%. What is the stock’s current value per share? 2. Use the information from question 2 to calculate the following. You will need to also calculate the current stock price for year 2 in order to calculate each of these items. (hint: Use PowerPoint slide 14 as a guide): Dividend yield Capital gains yield Total return 3. ABC Company also has perpetual preferred stock outstanding that sells for $25 a share and pays a dividend of $3.00 at the end of each year. What is the required rate of return?