10The following information has been collected regarding Big John Company:Most recent annual cash dividend per share$0.65Dividend growth rate over the past five years7%Most recent earnings per share$1.53Average P/E ratio of similar firms18Required rate of return on equity capital12%Estimate a price per share for Big John's stock using the constant dividend growth model.$13.00O $27.54$5.42$5.80O s13.91Submit Assessme

Constant Dividend Growth Model Under this model, dividends are paid for infinitely long period.…

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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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A firm recently paid a dividend of $1.75 per share. The dividend is expected to grow by 13% for the next 2 years. The dividend is expected to grow by a more modest 3.50% thereafter. What is the firm's stock value per share given a 6.95% discount rate? $58.61 ○ $62.41 $21.47 ○ $70.84
The Midfield Co. just issued a dividend of $1.36 per share on its common stock. The company is expected to maintain a constant 3 percent growth rate in its dividends indefinitely. If the stock sells for $28 a share, what is the company's cost of equity? 8.08% 7.64% 7.33% 7.16% 8.00%
Find the average annual growth rate of the dividends for each firm listed in the following table: What is the average annual growth rate of the dividends paid by Loewen? % (Round to two decimal places.) Data table ... (Click on the following icon in order to copy its contents into a spreadsheet.) Dividend Payment per Year Firm 2006 2007 2008 2009 2010 2011 Loewen $1.02 $1.06 $1.10 $1.21 $1.27 $1.32 Morse $1.12 $0.80 $0.90 $1.30 $1.25 $1.45 Huddleston $1.25 $2.25 $3.70 $3.75 $3.90 $5.00 Meyer $2.40 $2.00 $2.10 $2.74 $2.80 $2.96 Print Done - ☑
use EXCEL and provide Cell References for Calculations.
Retained earnings versus new common stock Using the data for a firm shown in the following table, calculate the cost of retained earnings and the cost of new common stock using the constant-growth valuation model. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Current market price per share $52.00 Dividend growth rate 6% a. The cost of retained earnings is %. (Round to two decimal places.) Projected dividend per share next year $2.60 Underpricing per share $1.50 Flotation cost per share $2.25
Year ended 30 Sept Dividendper share 1997 $ 0.21 Avg. Annual Geometric Growth Rate ??? 1998 $ 0.25 Current Annual Dividend $ 0.40 1999 $ 0.27 Current Stock Price $ 42.00 2000 $ 0.33 Cost of equity, Gordon Growth Model ??? 2001 $ 0.38 Share Price Using Cost of Equity ??? 2002 $ 0.40
Return on Equity Evans & Sons, Inc., disclosed the following information in a recent annual report: Net Income Average stockholders' equity Dividend per common share Earnings per share Market price per common share, year-end Previous Year Current Year $94,500 1,000,000 Previous Year $ Current Year $ 5.13 7.70 51.30 Did the return improve? The return on common stockholders' equity Calculate the return on equity for Evans & Sons for each year. Did the return improve? Numerator Denominator $129,600 1,500,000 0 0 5.40 8.64 56.70 ◆ 0 0 from the previous year to the current year. ROE % %
Vijay
Example: Stock Valuation Consider the following information for the company Fledgling Electronics: Expected earnings per share at the end of year $8.33 Expected dividend per share at the end of year $5 Market capitalization rate (r) 15% Expected growth rate dividends (per year) 10% 1. Calculate the current price per share of Fledgling Electronics 2. Calculate the capitalized value of Fledgling's EPS if it had a no growth policy 3. Calculate the present value of Fledgling's growth opportunities
What is the value of a stock with the following dividends, an 8.5% discount rate, and a growth rate of 6% (beginning in year 6)? (Round to the nearest dollar) Year Dividends $120 $99 $110 $80 $85 1 $2.16 2 $2.38 3 $2.61 4 $2.87 5 $3.16
The following ABC data are available: 1) profit to be retained: 75,000 m.u.; 3. 2) Expected rate of return on the investment in an ABC share: 15%; 3) the company follows the constant dividend increase policy; the fundamental analysis indicates that the assumption that the dividend will constantly increase is reasonable. 4) equity at the beginning of 2014: 1,100,000 m.u.; 5) number of shares issued: 100,000; 6) profit after tax in 2014: 200,000 m.u.; Price ABC shares using the Gordon-Shapiro formula.
Allstate Corp (ALL) recently paid a dividend of $5.51. The required rate of return is 6.97%. Other things held constant, what would the stock’s price be if the growth rate was 2.75%? A. $104.57 B. $134.16 C. $149.88 D. $179.85

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The following information has been collected regarding Big John C Most recent annual cash dividend per share $0.65 Dividend growth rate over the past five years 7% Most recent earnings per share $1.53 Average P/E ratio of similar firms 18 Required rate of return on equity capital 12%