CX Enterprises has the following expected dividends: $1.03 in one year, $1.23 in two years, and $1.32 in three years. After that, its dividends are expected to grow at 4.3% per year forever (so that year 4's dividend will be 4.3% more than $1.32 and so on). If CX's equity cost of capital is 12.2%, what is the current price of its stock? The price of the stock will be $. (Round to the nearest cent.)
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
![P 7-19 (similar to)
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CX Enterprises has the following expected dividends: $1.03 in one year, $1.23 in two years,
and $1.32 in three years. After that, its dividends are expected to grow at 4.3% per year
forever (so that year 4's dividend will be 4.3% more than $1.32 and so on). If CX's equity cost
of capital is 12.2%, what is the current price of its stock?
The price of the stock will be $ (Round to the nearest cent.)
Fnter your answer in the answer box and then click Check Answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4e07bfc9-132b-4ccb-baf9-5eaa0f3ac699%2F57b60d63-0b14-44bf-ae56-63a48fdad2be%2Fdy71fxo_processed.jpeg&w=3840&q=75)
![P 7-25 (similar to)
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AFW Industries has 202 million shares outstanding and expects earnings at the end of this
year of $688 million. AFW plans to pay out 65% of its eamings in total, paying 37% as a
dividend and using 28% to repurchase shares. If AFW's earnings are expected to grow by
7.5% per year and these payout rates remain constant, determine AFW's share price
assuming an equity cost of capital of 11.3%.
The price per share will be $
(Round to the nearest cent.)
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