The interest rate is 5%. IBM stock pays annual dividends that start at $10 next year and then grow by 2% every year thereafter, forever. a. What should be the price of IBM stock? What is the PIE ratio? b. What should its price be if dividends grow at 3% per year? What is the PIE ratio now?
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- What is the stock price today if the dividend grow at 2% forever, the required rate of return r=10%, dividend today is $2.00. What is the stock price at year 3?Suppose dividends on a stock are expected to be €1 per share for the next 3 years, and the required return is 10% . If the price of a stock is €100 in 3 years 'time when you plan to sell it, what price does this stock need to currently fetch on the market to make it worth buying? If the stock price is expected to increase by €1 three years from now, does the current stock price also increase by €1 ? Why or why not?A company will pay a dividend of $3.28 per share next year. The dividends are expected to grow at 3.75 percent per year indefinitely. You require a return of 10 percent on your investment. How much will you pay for the company’s stock today? What is the stock’s dividend yield (Hint: dividend yield is a stock’s dividend divided by its price)? What will the price be in a year? What is the implied return given the change in price over the one-year period from today? Please use a HP 10bii+ Financial Calculator
- A stock will pay a dividend next quarter of $1.00. If the expected return is 10% per year, compounded annually, what is the price of the stock? Suppose a stock will pay $0 for the next 4 years, and then pay $1 every quarter after that. The required return is 10% per year, compounded annually. What is the price of the stock? Suppose a stock will pay $0.50, $1.00, $1.50, $2.00 and then grow at 4% per year compounded quarterly. The required return is 10% per year compounded annually. What is the price of the stock?Dietterich Electronics wants its shareholders to earn a return of 8% on their investment in the company. At what price would the stock need to be priced today if Dietterich Electronics had a a. $0.20 constant annual dividend forever? b. $1.10 constant annual dividend forever? c. $1.90 constant annual dividend forever? d. $2.70 constant annual dividend forever?You expect that Microsoft will pay a dividend of $1.50 in one year, $1.75 in two years, and $2.00 in three years. After that, dividends are expected to grow at 3% per year. If your required rate of return is 8%, what should be the price of Microsoft today according to the Dividend Discount Model?
- Dietterich Electronics wants its shareholders to earn a return of 15% on their investment in the company. At what price would the stock need to be priced today if Dietterich Electronics had a a. $0.20 constant annual dividend forever? b. $0.90 constant annual dividend forever? c. $1.80 constant annual dividend forever? d. $2.80 constant annual dividend forever?Suppose Lilly V, Inc. has just paid a dividend. The next dividend, to be paid in a year, is forecasted to be $4. If the growth rate of dividends is 7% and the discount rate is 11%, at what price will the stock sell? a.Less than $100 b.More than $100 c.$100 d.$111Suppose Facebook Inc. currently pays $1 dividend. Analysts project that the dividend for the next three years will be $1, $2, and 5$. After that the annual dividend is predicted to grow at 5% per year. Investors require a 10% rate of return. What is the value of one share of Facebook stock under these assumptions?
- You expect a company to pay a dividend of 2.50 next year and 3.50 a share for the following 2 years. At that point, you expect that the dividend will increase by 4% every year. If your required return is 8%, what would you pay for the stock today? USE EXCELSuppose that Do = $1.00 and the stock's last closing price is $15.85. It is expected that earnings and dividends will grow at a constant rate of g = 3.50% per year and that the stock's price will grow at this same rate. Let us assume that the stock is fairly priced, that is, it is in equilibrium, and the most appropriate required rate of return is rs = 10.00%. The dividend received in period 1 is D1 = $1.00 × (1+0.0350) = $1.04 and the estimated intrinsic value in the same period is based on the D2 constant growth model: P₁: TS-8 Using the same logic, compute the dividends, prices, and the present value of each of the dividends at the end of each period. Activity Frame Dividend Price PV t 10.00% Period (Dollars) (Dollars) (Dollars) 0 $1.00 $15.85 1 1.03 16.46 $0.94 2 1.07 17.08 $0.97 3 1.11 17.69 $1.01 4 1.15 18.31 $0.97 5 1.19 18.92 $0.94 The dividend yield for period 1 is and it will The capital gain yield expected during period 1 is and it will each period. each period. If it is…What should you pay for a stock if next year's annual dividend is forecast to be $5.25, the constant-growth rate is 2.85%, and you require a 15.5% rate of return?