Maynard Steel plans to pay a dividend of $2.82 this year. The company has an expected earnings growth rate of3.9% per year and an equity cost of capital of 9.5%.a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm doesnot issue or repurchase shares, estimate Maynard's share price.b. Suppose Maynard decides to pay a dividend of $0.95 this year and use the remaining $1.87 per share torepurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price.a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm doesnot issue or repurchase shares, estimate Maynard's share price.Maynard's share price will be $(Round to the nearest cent.)

The dividend payout rate refers to the rate to be computed by taking the yearly dividend per share…

Answered: Maynard Steel plans to pay a dividend…

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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Anle Corporation has a current price of $13, is expected to pay a dividend of $2 in one year, and its expected price right after paying that dividend is $22. What is Anle's expected dividend yield? (Round to two decimalplaces.) What is Anle's expected capital gain rate? (Round to two decimalplaces.) What is Anle's equity cost of capital? (Round to two decimalplaces.)
Assume Gillette Corporation will pay an annual dividend of $0.61 one year from now. Analysts expect this dividend to grow at 11.5% per year thereafter until the 6th year. Thereafter, growth will level off at 2.3% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 8.4%? The value of Gillette's stock is $ (Round to the nearest cent.)
Kk.436.
Dorpac Corporation has a dividend yield of 1.4%. Its equity cost of capital is 7.8%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac's dividends? b. What is the expected growth rate of Dorpac's share price? a. What is the expected growth rate of Dorpac's dividends? The growth rate will be %. (Round to one decimal place.)
DFB, Inc. expects earnings next year of $4.48 per share, and it plans to pay a $2.54 dividend to shareholders (assume that is one year from now). DFB will retain $1.94 per share of its earnings to reinvest in new projects that have an expected return of 15.7% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.8%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.54 per share at the end of this year and retained only $0.94 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesti in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…
Assume Coleco pays an annual dividend of $1.90 and has a share price of $38.00. It announces that its annual dividend will increase to $2.20. If its dividend yield is to stay the same, what should its new share price be? The new share price should be $ (Round to the nearest cent.)
Assume that shareholder's required rate of return (r) is 9%. Dr. Pepper is expected to pay a dividend of $2.00 per share (D1) next year. Moreover, investors expect dividends to grow at a constant rate of 4% per year (g). According to the Dividend Discount Model, what should be the current price per share of Dr. Pepper?
Mackenzie Company has a price of $37 and will issue a dividend of $2.00 next year. It has a beta of 1.2, the risk-free rate is 5.4%, and the market risk premium is estimated to be 4.8%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.) b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? The expected growth rate for dividends is | %. (Round to two decimal places.)
Assume Gillette Corporation will pay an annual dividend of $0.69 one year from now. Analysts expect this dividend to grow at 11.1% per year thereafter until the 4th year. Thereafter, growth will level off at 1.6% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 8.7%? The value of Gillette's stock is $. nearest cent.) (Round to the
Assume Evco, Inc. has a current stock price of $50.92 and will pay a $2.20 dividend in one year; its equity cost of capital is 18%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? We can expect Evco stock to sell for $_____. (Round to the nearest cent.)
Dorpac Corporation has a dividend yield of 1.6%. Its equity cost of capital is 7.8%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac's dividends? b. What is the expected growth rate of Dorpac's share price? a. What is the expected growth rate of Dorpac's dividends? The growth rate will be %. (Round to one decimal place.) b. What is the expected growth rate of Dorpac's share price? What is the expected growth rate of Dorpac's share price? (Select the best choice below.) A. With constant dividend growth, the share price is expected to grow at rate g= 6.2% – 1.6% = 4.6%. B. With constant dividend growth, the share price is expected to grow at rate g= 6.2%. C. With constant dividend growth, the share price is expected to grow at rate g = 1.6%. D. With constant dividend growth, the share price is expected to grow at rate g= 7.8%.

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