QNo 1: Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below: a) The Walgreens Boots alliance Company has recently paid dividend D0 = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs? b) You have forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return? c) Merck & Co. is predicted to pay Rs. 1.70 dividend in one year. Further, the market is forecasting a growth in the company’s dividend by 3% per year. Given rate of return of 8% in this category, what is stock price of Merck & Co. to be in the third (3) year?
QNo 1: Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below: a) The Walgreens Boots alliance Company has recently paid dividend D0 = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs? b) You have forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return? c) Merck & Co. is predicted to pay Rs. 1.70 dividend in one year. Further, the market is forecasting a growth in the company’s dividend by 3% per year. Given rate of return of 8% in this category, what is stock price of Merck & Co. to be in the third (3) year?
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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Concept explainers
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Question
QNo 1: Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below:
a) The Walgreens Boots alliance Company has recently paid dividend D0 = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs?
b) You have forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return?
c) Merck & Co. is predicted to pay Rs. 1.70 dividend in one year. Further, the market is forecasting a growth in the company’s dividend by 3% per year. Given rate of return of 8% in this category, what is stock price of Merck & Co. to be in the third (3) year?
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