ncesA firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at theirprice target of $40 in two years.Compute the value of this stock with a required return of 11.3 percent.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.Value of stock

The value of the stock can be calculated using the Dividend Discount Model (DDM)The dividend…

Answered: nces A firm is expected to pay a…

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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Consider a stock that will pay out a dividends over the next 3 years of $1.4, $1.9, and $2.4, respectively. The price of the stock will be $51.81 at time 3. The interest rate is 13%. What is the current price of the stock? Enter your response below rounded to 2 DECIMAL PLACES.
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Investors require a 17% rate of return on Levine Company's stock (i.e., rs = 17%) A. What is its value if the previous dividend was D0 = $1.75 and investors expect dividends to grow at a constant annual rate of (1) -6%, (2) 0%, (3) 3%, or (4) 12%? Do not round intermediate calculations. Round your answers to two decimal places.
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