Homework Help is Here – Start Your Trial Now!
Business
Finance
According to the dividend growth model, what should the stock price be today?

According to the dividend growth model, what should the stock price be today?

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question

vipul

 

You've collected the following information from your favorite financial website. 52-Week Price Lo 10.43 Acevedo .36 33.42 70.00 13.95. 20.74 Hi 77.40 55.81 131.031 50.24 35.00 Stock (Dividend) Georgette, Incorporated 1.54 YBM 2.50 Manta Energy .80 Winter Sports .32. Dividend PE Yield Ratio 2.6 3.8 2.8 5.2 1.5 Answer is complete but not entirely correct. Current stock price $ 76.21 x 6 10 10 6 28 Close. Price 13.90 40.43 89.07 15.43 ?? Net Change -.24 -.01 3.07 -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Transcribed Image Text:You've collected the following information from your favorite financial website. 52-Week Price Lo 10.43 Acevedo .36 33.42 70.00 13.95. 20.74 Hi 77.40 55.81 131.031 50.24 35.00 Stock (Dividend) Georgette, Incorporated 1.54 YBM 2.50 Manta Energy .80 Winter Sports .32. Dividend PE Yield Ratio 2.6 3.8 2.8 5.2 1.5 Answer is complete but not entirely correct. Current stock price $ 76.21 x 6 10 10 6 28 Close. Price 13.90 40.43 89.07 15.43 ?? Net Change -.24 -.01 3.07 -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Stock Yields
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
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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
SEE MORE TEXTBOOKS