Particulars1. Discount rateАВСXYZ18.5%14.25%Not2. Historical growth rate 2.2218%available3. Sustainable growth4.5%20%rate4. Fundamental value ofstock using dividendgrowth model throughhistorical growth rate5. Fundamental value ofstock using dividendgrowth model throughsustainable growth rate6. Fundamental value ofstock using residualincome growth modelthrough historical growthrate7. Fundamental value ofstock using residualincome growth modelthrough sustainablegrowth rateNotTavailable3395Notavailable3953Not427.30available420.35 196.5 Suppose ABC has changed its products, and dividends will not grow at thesame rate.a. Explain which stock valuation model(s) you would choose?b. Given the current price, should you buy or sell ABC stock?

Stock is the security which is offered by the firm to collect the funds. Stock value fluctuates in…

Particulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth Not available 3395 Not available 3953 Not 427.30 available rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate 420.35 96.5

Particulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth Not available 3395 Not available 3953 Not 427.30 available rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate 420.35 96.5

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

Financial analyst of Castle Investment Trust has gathered the following information on FRIVY Inc. and the market: Current market price per share of common stock €76.5Most recent dividend per share paid on common stock € 5.2Expected dividend payout rate 32%Expected return on equity (ROE) 12.5%Beta for the common stock 1.43Expected return on the market portfolio 13.40%Risk-free rate of return 4.20%Using the dividend discount model approach, estimate the cost of common equity for the company.
Question 1 • An analyst has gathered P/E information on two stocks, Firm A and Form B. Market Data on Firm A and Firm B Trailing P/E Leading P/E 5-year Growth Rate Beta 10.0 Firm A 8.7 11.0% 1.3 Firm B 9.0% 14.0 12.7 1.4 11.0% Peer median 13.3 12.1 1.3 • Evaluate the value and P/E of each stock based on the method of comparables.
1 Nonconstant Growth and Corporate Valuation 2 3 Last dividend, Do 4 Required rate of return, re 5 Supernormal growth rate. gs 6 Normal growth rate, gn 7 Period of supermormal growth 8 14 Horizon value at the end of year 2 15 Stock price 16 Dividend yield during year 1 17 Capital gains yield during year 1 9 a. Finding TTC's stock worth today, its expected dividend, and capital gains yields 10 Dividend Formulas Year 1 2 Ready 19 b. Finding the price, dividend yield, and capital gains yield 20 Period of supernormal growth 5 years $1.10 9% 20% Year 1 Sheet1 Accessibility Good to go 62°F Partly sunny 2 years Dividend C Q Search D #N/A #N/A #N/A #N/A #N/A E F A G H I K #
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What is the intrinsic price of a stock that pays a dividend of $2.43, has a dividend growth rate of 3.5% and a Beta of 1.20? The market return is 5.15% and the risk free rate is 3%. O A. $21.84 O B. $33.66 O C. $40.67 O D. $120.92 QUESTION 18 What is the intrinsic price of a stock that pays a dividend of 60 cents, has a dividend growth rate of 4.80% and a Beta of 2.57? The market return is 7.75% and the risk free rate is 2.5%. O A. $1.22 O B. $5.62 O C. $6.19 O D. $25.39
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P7-23 Integrative: Risk and valuation Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. Current price per share of common $50.00Expected dividend per share next year $ 3.00Constant annual dividend growth rate 6.5%Risk-free rate of return 4.5%
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A. What is the investor's required rate of return for Green Gadgets' stock? ________% (round to two decimal paces) B. Assuming that the investor's required rate of return for Green Gadget's stock does not change, what would you expect to happen to the price of its common stock if it cuts dividend to $3? $_______ (round to the nearest cent) C. Should Green Gadgeds cut its dividend? ( select from the drop down menus) Green Gadgets Should / Should not cut the dividend because cutting the dividend will increase / decrease the value of the common stock.

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