ABC, Inc has a current dividend of $1.00 and a required rate of return of 12%. Adividend growth rate of 15% is projected for the next 2 years, followed by a 10%growth rate for the next 4 years before settling down to a constant 4% growth ratethereafter. What is the expected stock price of ABC in year 4?1) $14.192) $17.513) $20.644) $23.18

The dividend growth model is a method used to determine the intrinsic value of a stock based on its…

Answered: ABC, Inc has a current 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

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Similar questions

XYZ Co. will pay a $3.20 per share dividend at the end of the year. The dividend growth rate = 8.5% per year Stock Price = $62.20 What is the required rate of return?
A company just paid a $1.75 dividend and expects it to grow 5% for the next 3 years. After 3 years, the dividend is expected to grow at 3% indefinitely. If the required rate of return is 9%, what is the stock's value today? a. What is the Future Value of the Dividends in Years 1, 2, 3, and 4? b. What is the Present Value of the Dividends in Years 1, 2, 3, and 4? c. What is the stock's value in Year 4 (Terminal Value)? d. What is the stock's value today?
A company currently pays a dividend of $3.8 per share (D0 = $3.8). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 9.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
You observe a stock price of $17. You expect a dividend growth rate of 5% and the current year's dividend was $1.70. What is the required return? 15% 15.5% 10%
YZ Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 17% during the next 2 years, at 15% the following year, and at a constant rate of 7% during Year 4 and thereafter. Its last dividend was $1.55, and its required rate of return is 12%. a. Calculate the value of the stock today. b. Calculate P1 and P2 (Prices for Year 1 and Year 2). c. Calculate the dividend and capital gains yields for Years 1, 2, and 3.
A company currently pays a dividend of $3.2 per share (D0 = $3.2). It is estimated that the company's dividend will grow at a rate of 23% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 9.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the price expected to be in year 4? a. $40 b. $10 c. $41.6 d. $50.50
Entergy stock is currently trading at $40. The company is currently paying a dividend of $4, which is expected to grow at 5% in a year and then at g% forever. If the required rate of return is 9% and the stock price next year is $45, find the value of g.
You expect a company to pay a dividend of 2.50 next year and 3.50 a share for the following 2 years. At that point, you expect that the dividend will increase by 4% every year. If your required return is 8%, what would you pay for the stock today? USE EXCEL
News Corp is expected to pay a dividend of $0.8 in one year. The dividend is expected to grow at 12% in the following 3 years and then at a constant rate of 4% per annum indefinitely. If the required rate of return is 12%, what is the price of the company's share today? Please illustrate your answer using a timeline.
d) BMC is expected to pay a $1 dividend per share next year. If the stock price today is $20, what is the required rate of return? Assume that the dividend is expected to grow at a constant growth rate of 3%.
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

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