Laurel Enterprises pays annual dividends, and the next dividend is expected to be in one year. Laurel expects earnings next year of $4.26 per share and has a 30% retentionrate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment; this is expected to continue forever. What do youestimate the firm's current stock price to be? (Hint: its next dividend is due in one year.)

The objective of the question is to estimate the current stock price of Laurel Enterprises. This can…

Answered: Laurel Enterprises pays annual…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Laurel Enterprises expects earnings next year of $3.99 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 5.5% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be?
Stability Corporation’s dividend is expected to be $1.60 next year. Its current stock price is $40 per share. The company is a constant growth firm. If investors require a return of 12 percent on this stock, what do they think Stability’s growth rate will be?
The firm just paid an annual dividend of $0.8 per share and plans to increase that amount by 25% next year. After that, the firm expects the dividend will grow by 3% annually. What is the expected value of this stock next year if the required return is 13 percent? 9.9 O 10.3 10.2
CompuCon is a new firm that just paid an annual dividend of $2.25 per share. The firm plans to increase its dividend by 23 percent per year for the next four years and then decrease the growth rate to 5 percent annually. If the required rate of return is 10.25 percent, what is one share of this stock worth today?
You expect a company to pay a dividend of 2.50 next year and 3.50 a share for the following 2 years. At that point, you expect that the dividend will increase by 4% every year. If your required return is 8%, what would you pay for the stock today? USE EXCEL
The future earnings, dividends, and common stock price of Core-Tech, Inc. are expected to grow 6% per year. Core-Tech's common stock currently sells for $21 per share; its last dividend was $2.00; and it will pay a $2.30 dividend at the end of the current year. If the firms beta is 1.9, the risk free rate is 8%, and the average return on the market is 14%, what is the firms cost of common equity (retained earnings) using the CAPM approach?
Spendex Corporation paid a dividend of $ 1.13 per share today. Dividends are expected to grow at 11.00% per year for the next 3 years, then at 8.00% per year in the following 2 years. After the 5th year, the growth in dividends is expected to remain constant at 6.00%. As an investor, you require a 10.00% rate of return on this equity investment. What is the maximum price you would be willing to pay for a share of Spendex?
Zapata Corporation will pay dividends of USD 5.00, USD 6.00, and USD 7.00 in the next three years. Thereafter, the company expects its dividend growth rate to be a constant 10 percent. If the required rate of return is 15 percent, what is the current market price of Zapata stock?
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%
Laurel Enterprises expects earnings next year of $4.43 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 4.4% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be? The current stock price will be $ (Round to the nearest cent.)
use excel and explain why
The firm just paid an annual dividend of $0.8 per share and plans to increase that amount by 25% next year. After that, the firm expects the dividend will grow by 2% annually. What is the expected value of this stock next year if the required return is 12 percent? 10.2 10.3 9.9

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