Question 19 You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% Page 8 of 11 a. What is the intrinsic value per share? b. Quantify the upside or downside of the stock if you purchase the shares at market value.

Question 19 You are valuing Purefoy Inc. using a 3-stage Dividend Discount Model. The firm paid a dividend of $10 per share in Year 0 and its cost of equity is 10%. It has 50 million shares outstanding. The stock is trading at $105 per share. The assumptions for the 3-stage model are as follows: Number of years 6 8 from Year 15 to infinity First Stage Second Stage Final Stage Dividend growth rate 4% 0% -1% Page 8 of 11 a. What is the intrinsic value per share? b. Quantify the upside or downside of the stock if you purchase the shares at market value.

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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Question 1 One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He tells you that the company has a good track record of paying regular dividend every year and the dividends are likely to grow at a rate of 4% per year on an average for the foreseeable future. The next dividend is expected to be $1.50 per share and the shares are selling in the secondary market for $28.50 per share. As per your financial plans and life profile, you feel that any risky investment like in shares of a company, should earn at least 9% per annum. 1. Will you buy these shares? Why and support your reasoning with relevant computations.
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Question 12?
Problem 1 You are considering purchasing a share of Belgravia Petroleum Inc. The company just announced its earnings per share of $2.50. Management predicts that earnings will grow at 10% per year for the next 4 years and then at 1% thereafter. Belgravia's policy is to pay out 40% of its earnings in dividends. The discount rate for Belgravia is 12%. How much is the stock price of Belgravia?
A firm that just paid a dividend of $2.60. It plans to increase dividends by 5% in year one, 10% in year two, 20% in year three, 20% in year four, and then 3% per year thereafter. You feel that a 16% required return is appropriate. What is this stock worth to you? Question 35Answer a. $4.23 b. $34.23 c. $28.18 d. $38.55
Problem 9.27 Staggert Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, the company expects its dividend growth rate to be constant at 8.5 percent. If the required rate of return is 17.0 percent, what is the current value of the stock? (Round intermediate calculations and final answer to 2 decimal places, e.g. 16.25.) Current value Click if you would like to Show Work for this question: Open Show Work
Born On The 4th Of Supply Industrial Goods paid a quarterly dividend of $3.55 per share last quarter. Today, the company announced that future dividends will be increasing by 0.8% quarterly. If you require a 92% annual rate of return, how much, to the nearest cent, are you willing to pay to purchase one share of this stock today? $4.03 $15.43 $16.12 $15.99 $3.92 Give typing answer with explanation and conclusion
1 Two-Stage Dividend Growth Model and H-Model 2 Please use following information and solve the Two-Stage Dividend Discount Model and H-Model Problem 3 Suppose a firm has a current dividend of D(0) = $2.00 which is expected to growth 25% a year for 3 years 4 and thereafter grow at the rate of 5 percent with a discount rate or required rate of return of 15 percent 6 D(0) $2.00 3 7 N 8 G1 9 G2 10 K 25% 5% 15% DK N G1 G2 K 11 12 1 Two-Stage Dividend Discount Model 13 What is the value of the stock? Po 14 P(O) $ 34.07 $34.07 $87.57 Do (1+g₁ k-9₁ 15 16 17 2 H-Model 18 What is the value of the stock? 19 20 Year 1 21 Growth Rate 25.00% Year 2 Year 3 17.50% 9.17% Year 4 0.83% 22 Dividends 23 241 Please do not type any Numbers in the table above You must link the table in Cell A6 to this Table 25 26 First Calculate P(3) $ 34.69 $ 102.88 27 28 PV of D(1) $ 2.17 $ 5.42 29 PV of D(2) $ 2.24 $ 5.57 30 PV of D(3) $ 2.17 $ 5.41 31 PV of P(3) $ 22.81 $ 59.54 32 33 P(0)= $ 29.39 $75.93 34 Show…
Melia Corporation Current share price $4.65 Current dividend $0.10 Required return on equity 6% Net Income $2.7 Mln Total shareholders’ equity $19 Mln Beta 1.15 Ten year Melia bond yield 3.8% Melia’s expected growth rate for the next five years is 18%, dropping to a long term sustainable rate into perpetuity of 4% For Melia, use a form of the dividend discount model to determine the fair value of the share price. Is Melia under or over-valued compared to the market
Intro Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $69 a share. The before-tax cost of debt is 7% and the tax rate is 34%. The target capital structure consists of 20% debt and 80% equity. Part 1 What is the company's weighted average cost of capital? 3+ decimals Submit
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2. Problem 10.04 (Cost of Equity with and without Flotation) еВook Problem Walk-Through Jarett & Sons' common stock currently trades at $24.00 a share. It is expected to pay an annual dividend of $2.50 a share at the end of the year (D1 = $2.50), and the constant growth rate is 3% a year. a. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the company issued new stock, it would incur an 8% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.

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