Assume Highline Company has just paid an annual dividend of $0.98. Analysts are predicting an 10.8% per year growth rate in earnings over the next five years. After then, Highline's earnings areexpected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 8.4% per year and its dividend payout ratio remains constant, for what price doesthe dividend-discount model predict Highline stock should sell?The value of Highline's stock is $(Round to the nearest cent.)

The dividend discount model (DDM) is a method used to value a stock by estimating its intrinsic…

Answered: Assume Highline Company has just paid…

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

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Company has just paid an annual dividend of $1.66. Analysts are predicting dividends to grow by $0.16 per year over the next 5 years. After then, Colgate's earnings are expected to grow 4.2% per year, and its dividend payout rate will remain constant. If Colgate's equity cost of capital is 5.1% per year, what price does the dividend-discount model predict Colgate stock should sell for today?
Assume Gillette Corporation will pay an annual dividend of $0.61 one year from now. Analysts expect this dividend to grow at 12.1% per year thereafter until the 4th year. Thereafter, growth will level off at 2.4% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 8.5%? round to the nearest cent
Assume Highline Company has just paid an annual dividend of $0.95. Analysts are predicting an 10.7% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.5% per year. If Highline's equity cost of capital is 7.9% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell?
Assume Highline Company has just paid an annual dividend of $1.06. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 7.9% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell?
Crane Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 6 percent. If the required rate of return is 15.50 percent, what is the current value of the stock?
Bugatti, Inc is expected to pay a dividend of $3.55 next year (i. e., D1 = 3.55) and its current stock price is $48. The discount rate for the company is 13%. If the market expects Bugatti's dividends to grow at a constant rate forever, then the growth rate must be %
Analysts forecast that Dixie Chicks, Inc. (DCI) will pay a dividend of $3.00 a share now, continuing a long-term growth trend of 8% per year. If this trend is expected to continue indefinitely, and investors' required rate of return for DCI is 14%: a) What is the market value per share of DCI's common stock? b) What is the market value per share of DCI's common stock if required rate of return is 11%? c) If there is expected to be non-constant growth of 30% for the first year, then 24% for the next year, then 14% for next year, finally stabilizing to a constant growth of 9% per year in the 4th year what is the market value per share with the original required rate of return?
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Company has just paid an annual dividend of $1.17. Analysts are predicting dividends to grow by $0.19 per year over the next 5 years. After then, Colgate's earnings are expected to grow 3.6% per year, and its dividend payout rate will remain constant. If Colgate's equity cost of capital is 6.9% per year, what price does the dividend-discount model predict Colgate stock should sell for today?
GottaGrow Corporation has expected earnings per share of $10. It has a history of paying cashdividends equal to 25% of earnings. The market capitalization rate for GottaGrow stock is 10% peryear, and the expected rate of return on future investments is 10% per year. Using the constant growthrate discounted dividend model, what is the expected growth rate of dividends? What is the model’sestimate of the present value of the stock? What is the expected price of a share a year from now?

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