Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm over a five-year horizon.a. What is the value of the stock if the current dividend is $1.4, the first-stage growth is 14%, the second-stage growth is 7%, and thediscount rate is 15%?b. What is the value of the stock if the current dividend is $1.4, the first-stage growth is 1%, the second-stage growth is 13%, and thediscount rate is 14.0%?c. What is the value of the stock if the current dividend is $2.8, the first-stage growth is 14%, the second-stage growth is 7%, and thediscount rate is 13%?Complete this question by entering your answers in the tabs below.Required ARequired B Required CWhat is the value of the stock if the current dividend is $1.4, the first-stage growth is 1.4%, the second-stage growth is[a (7)%, and the discount rate is 14%?Note: Do not round intermediate calculations. Round your answers to 2 decimal places.Year 4Year 5Projected dividendTerminal pricePresent valueYear 11.41Year 2Year 3< Required ARequired C >

When, the expected periodical cash flow related to stock, i.e., the dividend is found in terms of…

Answered: Design a spreadsheet similar to the one…

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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Consider a stock that is going to pay a dividend of $5 in year 1. Dividends are going to be constant from year 1 to year 5. From year 5 to year 6 dividends will grow at a rate of 6%. They will then grow at the rate of 5% each year forever. The required rate of return is 10%. What is the stock price today? (Answer using Excel format)
A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price? a. $17.39 b. $17.84 c. $18.29 d. $18.75 e. $19.22
Use the two-stage dividend growth model to value a stock, using the following information: The cost of equity is 13% (1) Dividends have been growing at an annual rate of 10% for the last five years and assume this growth rate will continue through the next 5 years, which is the first stage. The last dividend paid was $2.00. Calculate the expected dividend each year for years 1 - 5 and their present values. (2) Suppose that after year 5, the dividends are expected to grow at 2.5% (second-stage growth rate) per year, indefinitely. (3) Calculate today's stock price based on the above information.
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 stock is expected to pay a dividend of $1.42 at the end of the year. The required rate of return is rs = 15.32%, and the expected constant growth rate is g = 2.4%. What is the stock's current price?
Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm over a five-year horizon. What is the value of the stock if the current dividend is $1.3, the first stage growth is 16%, the second stage growth is 8%, and the discount rate is 15% ? What is the value of the stock if the current dividend is $1.3, the first stage growth is 8%, the second - stage growth is 14 %, and the discount rate is 16.0% ? What is the value of the stock if the current dividend is $2.6, the first - stage growth is 14%, the second - stage growth is 7%, and the discount rate is 13% ?
Suppose that a firm with a stock price of $80 just announced that it expects to pay a $100 per share liquidating dividend in 1 year, although the exact amount of the dividend depends on the performance of the company this year. Assume that the CAPM is a good description of stock price returns and that the stock’s beta is 1.5, the market’s expected return is 12%, and the risk-free rate is 5%. 1) Is the stock priced correctly now? 2) What is the alpha of the stock? 3) What would you expect to happen to the stock price in an efficient market after the announcement? Give typing answer with explanation and conclusion
A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 9%. What is the stock's current price? Select the correct answer. a. $46.00 b. $48.00 c. $47.00 d. $50.00 e. $49.00
You expect that Microsoft will pay a dividend of $1.50 in one year, $1.75 in two years, and $2.00 in three years. After that, dividends are expected to grow at 3% per year. If your required rate of return is 8%, what should be the price of Microsoft today according to the Dividend Discount Model?
Suppose Lilly V, Inc. has just paid a dividend. The next dividend, to be paid in a year, is forecasted to be $4. If the growth rate of dividends is 7% and the discount rate is 11%, at what price will the stock sell? a.Less than $100 b.More than $100 c.$100 d.$111
Fey Fashions expects the following dividend pattern over the next seven years: The company will then have The a. 15%? b. 20%? a. What is the stock's price today if an investor wants to earn 15%? (Round to the nearest cent.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 Year 2 Year 3 Year 4 Year 5 $1.20 $1.34 $1.50 $1.68 $1.88 Print company will then have a constant dividend of $2.70 forever. What is the stock's price today if an investor wants to earn Done *** Year 6 $2.11 Year 7 $2.36 - X

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