As a stock analyst Mooch covers the common stock of GE, which sells for $11 pershare and just paid a dividend of $.52. The best estimate Mooch can come up is thatthe next two dividends for GE will be $.55 and then $.605, with steady state annualgrowth rate of 10 percent thereafter. What required return per year for the commonstock of GE must be?

The constant growth model is a stock valuation method used in finance to determine a stock's…

Answered: growth rate of 10 percent thereafter.…

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growth rate of 10 percent thereafter. What required return per year for the common stock of GE must be ?

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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Similar questions

What constant-growth rate in dividends is expected for a stock valued at $32.40 if next year's dividend is forecast at $2.20 and the appropriate discount rate is 13.6%?
What would be the price of a stock that pays an annual fixed dividend of $1.2 for ten years, and then the dividend payment increases by 1% every year, and the required rate of return is 5% annually
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?
If the current year's dividend was $2 per share and all future dividends will decrease by 5% annually. What is the stock worth today at a required return of 15%?A. 9.5 B. 10C. 20
What would be the price of a stock that pays an annual fixed dividend of $1 for ten years, and then the dividend payment increases by 1% every year, and the required rate of return is 5% annually?
How much would you be prepared to pay for a share in 2 years’ time that pays a $1.5 dividend each year constantly ? Assume the required rate of return is expected to remain constant at 9.1% per year.
A Company is currently paying a dividend of Rs 10.00 per share and is expected to grow at a rate of 12 percent per year for five years and thereafter at a rate of 6% per year. Calculate the present value of the share if the required rate of return of 10%.
Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the price expected to be in year 4? a. $40 b. $10 c. $41.6 d. $50.50
For Finance class: What are the equations to use for end-of-year price per share? Turnover rate? Annual rate of return? rate of return with load expenses and multiple years?
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Current stock price b. Value of ROE c. Amount % per share
d) BMC is expected to pay a $1 dividend per share next year. If the stock price today is $20, what is the required rate of return? Assume that the dividend is expected to grow at a constant growth rate of 3%.
A corpus expected to pay a dividend of $1.25 per share at the end of the year (D1=$1.25). the stock sells for 27.50 per share and it's required return is 9.75 the dividend is expected to grow at some constant rate forever. what is the equilibrium expected growth rate?

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