Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of7% and that its dividend yield is 8%. C&J is about as risky as the average firm in the industry andjust paid a dividend (Do) of $1.5. Analysts expect that the growth rate of dividends will be 50%during the first year (90,1 = 50%) and 25% during the second year (91,2 = 25%). After Year 2,dividend growth will be constant at 7%. What is the required rate of return on C&J's stock? What isthe estimated intrinsic price per share? Do not round intermediate calculations. Round the monetaryvalue to the nearest cent and percentage value to the nearest whole number.rs:Po: $6140.18%

Constant growth rate = 7%Dividend yield = 8%Dividend (D0) = $1.5Growth rate in year 1 (G1) =…

Answered: Ime that 7% and that its dividend yield…

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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Vonderboom Company just paid a dividend of $1.67 per share to its stocholders. Market analysts believe Vonderboom Company will grow by 19% next year, 13.75% the following year, and 13% the year after. Then, it is projected that Vonderboom Compnay will grow at a constant rate of 4.75% per year indefinitely. The current rate of interest on risk - free assets is 2.51 %, and the rate of return on market portfolio is 11.25 %. Vonderboom Company's beta is estimate to be 1.09. What is the estimate of the current market price of Vonderboom Company's stock?
Taussig Technologies Corporation (TTC) has been growing at a rate of 15% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to gn = 6%. If D0 = $1.20 and rs = 13%, what is TTC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent.$ What is its expected dividend yield at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. %What is its capital gains yields at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. What will TTC's dividend and capital gains yields be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth; the calculations are very easy.) Round your answers to two decimal places.Dividend yield: %Capital gains yield
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 28% for the next 2 years, 18.00% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.25%. The company’s last dividend was $1.00, its beta is 1.75, the market risk premium is 6.55%, and the risk-free rate is 4.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Hi-Tec is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15% a year for the next two years and then decreasing the growth rate to 5% per year after. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share if the required rate of return is 8.60%7 $29.56 $34.89 $38.73 $41.01 $46.45
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 21.45% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.50%. The company’s last dividend was $1.75, its beta is 1.15, the market risk premium is 9.70%, and the risk-free rate is 5.00%. What is the current price of the common stock? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
An equity analyst from Jefferies & Co. expects Johnson & Johnson (NYSE: JNJ) current annual dividend of $1.50 to grow by 25% in one year and by 15% for two consecutive years. The analyst then forecasts the initial non-linear supernormal dividend growth rate of 15% to decline linearly to a final and constant growth rate of 8% over a 10-year period. Company's estimated cost of equity is 12%. Which of the following is closest to the estimate of the fair value of JNJ based on these inputs? O $68.26 O $54.75 O $51.27 O $76.21
The “Land of Oz” company expects its ROE to be 20%. The company plans to maintain a retention ratio of 60% and to have a constant dividend growth rate. The company’s forecast earnings for the year is $0.34 per share (i.e., E1 = $0.34). Investors expect a 13% rate of return on the “Land of Oz” stock. What is the present value of growth opportunities (PVGO) for the “Land of Oz”?
Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of 4% and that its dividend yield is 8%. C&J is about as risky as the average firm in the industry and just paid a dividend (DO) of $2. Analysts expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 20% during the second year (g1,2 = 20%). After Year 2, dividend growth will be constant at 4%. What is the required rate of return on C&J's stock? What is the estimated intrinsic price per share? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest
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You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $3 this year. Furthermore, you expect that they will pay out $2.25 of these earnings to shareholders in the form of a dividend at the end of this year. You estimate that LBE's return on new investments is 16% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to: OA. 4% OB. 3.3% OC. 1.6% OD. 2.4%
colgate palmolive Company has just paid an annual dividend of $1.57. Analysts are predicting dividends to grow by $0.17 per year over the next 5 years. After then, 's earnings are expected to grow 3.6% per year, and its dividend payout rate will remain constant. If's equity cost of capital is 7.4% per year, what price does the dividend-discount model predict colgate stock should sell for today? What is the price per share?
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 32% for the next 2 years, 18.00% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 7.00%. The company’s last dividend was $1.60, its beta is 1.75, the market risk premium is 9.85%, and the risk-free rate is 6.00%. What is the current price of the common stock?

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