E eBook Nonconstant Dividend Growth Valuation Conroy Consulting Corporation (CCC) has a current dividend of De $1.20. Shareholders require an 11% rate of return. Although the dividend has been growing at a rate of 29% per year in recent years, this growth rate is expected to last only for another 2 years (90.191,2-29%). After Year 2, the growth rate will stabilize at 9.- 4%. a. What is CCC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent $ b. What is the expected stock price at Year 17 Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? Do not round intermediate calculations. Round your answers to two decimal places. Dividend yield: Capital gains yield: Total return:

E eBook Nonconstant Dividend Growth Valuation Conroy Consulting Corporation (CCC) has a current dividend of De $1.20. Shareholders require an 11% rate of return. Although the dividend has been growing at a rate of 29% per year in recent years, this growth rate is expected to last only for another 2 years (90.191,2-29%). After Year 2, the growth rate will stabilize at 9.- 4%. a. What is CCC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent $ b. What is the expected stock price at Year 17 Do not round intermediate calculations. Round your answer to the nearest cent. $ c. What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? Do not round intermediate calculations. Round your answers to two decimal places. Dividend yield: Capital gains yield: Total return:

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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Godzilla Corp.'s most recent dividend was $2. Next year, Godzilla Corp. plans to increase dividends 15%. After that Godzilla Corp. expects to grow dividends at a constant 5% per year from that point forward. The required rate of return for Godzilla Corp. stock is 10%. What is the current intrinsic value of Godzilla Corp. stock? Godzilla Corp. D0 $2 Dividend Growth Rate First Year 15% Constant Growth Rate after First Year 5% Required Rate of Return on Godzilla Corp. Stock 10% P0 ?
Constant Dividend Growth Valuation Woidtke Manufacturing's stock currently sells for $28 a share. The stock just paid a dividend of $1.20 a share (i.e., Do $1.20), and the dividend is expected to grow forever at a constant rate of 5% a year. What stock price is expected 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is the estimated required rate of return on Woidtke's stock (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answer to two decimal places.
Cost of Equity: Dividend Growth Summerdahl Resort's common stock is currently trading at $39 a share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 7% a year. What is the cost of common equity? Round your answer to two decimal places.
CONSTANT GROWTH You are considering an investment in Justus Corporation’s stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 5 $2.25) and has a beta of 0.9. The risk-free rate is 4.9%, and the market risk premium is 5%. Justus currentlysells for $46.00 a share, and its dividend is expected to grow at some constant rate,g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P ⁄3?)
Changes in Growth and Stock Valuation Consider a firm that had been priced using a 7 percent growth rate and a 10 percent required rate. The firm recently paid a $1.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 8 percent rate. How much should the stock price change (in dollars and percentage)?
CONSTANT GROWTH VALUATION Harrison Clothiers’ stock currently sells for $17.00 a share. It just paid a dividend of $1.00 a share (that is, D0 = $1.00). The dividend is expected to grow at a constant rate of 7% a year. What stock price is expected 1 year from now? Round to TWO decimal places.
Nonconstant Dividend Growth Valuation A company currently pays a dividend of $1.6 per share (D0 = $1.6). It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.3, the risk-free rate is 9%, 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. 17.06 IS NOT THE ANSWER
евook Problem Walk-Through Holt Enterprises recently paid a dividend, Do, of $1.50. It expects to have nonconstant growth of 16% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 8%. a. How far away is the horizon date? I. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. II. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. III. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. IV. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. V. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. -Select- V b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest…
A fast growing firm paid a dividend of $1.00 per share during the most recent year. The dividend is expected to increase at a rate of 20.0% per year for the next 3 years, Afterwards, a more stable 5.00% annual growth rate should be assumed - If a 10.00% discount rate is appropriate for this stock, what is its value? $18.64 $30.84 $28.36 $36.40
Common stock value-Variable growth Lawrence Industries' most recent annual dividend was $2.16 per share (D, = $2.16), and the firm's required return is 11%. Find the market value of Lawrence's shares when dividends are expected to grow at 20% annually for 3 years, followed by a 6% constant annual growth rate in years 4 to infinity. The market value of Lawrence's shares is $. (Round to the nearest cent.)
Nonconstant Dividend Growth Valuation 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 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 1.6, the risk-free rate is 10%, and the market risk premium is 7%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent. $
Dividend discount model NVIDIA (NVDA) Corporation just paid a dividend of $0.16 a share. Wall Street analysts expect that the dividend will grow at 95.05% per year for the next five years. After five years, the growth rate will fall to 6% in perpetuity. Assume a discount rate of 8%. a. Using the above assumptions, what is your estimated price per share for NVIDIA stock? b. What would the dividend need to be in year 1 to justify the current stock price of $726 per share?

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