A4 8f 8. ABC Co. has the following dividend payment history for the last five years, with the most recent dividend being $1.10: $0.50, $0.60, $0.80, $1.00, $1.10. Expected growth rate of dividends by averaging the growth rates: Year Dividend 1 $1.10 2 $0.50 3 $0.60 4 $0.80 5 $1.00 6 $1.10 Average growth rate is 20.55%
A4 8f 8. ABC Co. has the following dividend payment history for the last five years, with the most recent dividend being $1.10: $0.50, $0.60, $0.80, $1.00, $1.10. Expected growth rate of dividends by averaging the growth rates: Year Dividend 1 $1.10 2 $0.50 3 $0.60 4 $0.80 5 $1.00 6 $1.10 Average growth rate is 20.55%
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
Related questions
Question
A4 8f
8. ABC Co. has the following dividend payment history for the last five years, with the most recent dividend being $1.10: $0.50, $0.60, $0.80, $1.00, $1.10.
Expected growth rate of dividends by averaging the growth rates:
|
Year |
Dividend |
|
1 |
$1.10 |
|
2 |
$0.50 |
|
3 |
$0.60 |
|
4 |
$0.80 |
|
5 |
$1.00 |
|
6 |
$1.10 |
Average growth rate is 20.55%
Average growth rate = (17.08% + 22.08%+ 22.50%) /3
Average growth rate = 20.55%
Dividend growth model
f. ABC’s share price is currently $70, and the most recent dividend paid is $1.10 per share. Using the expected growth rate estimated in, calculate the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
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