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The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It's Return on Equity (ROE) has been 15%.

The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It's Return on Equity (ROE) has been 15%.

Essentials Of Investments
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
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The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It's Return on Equity (ROE) has been 15%. What is the company's current Dividend Yield? Dividend Discount Model The market expects that companies similar to XYZ will display a rate of return of 13% per year What is the company's expected Growth Rate for Earnings & Dividends? What dividends will the company pay this year (DO) and be expected to pay next year (D1)? What is the estimated value of the stock today (T=0) using the Dividend Discount Model? What is the estimated value of the stock 1 year from today (T=1)?
Transcribed Image Text:The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It's Return on Equity (ROE) has been 15%. What is the company's current Dividend Yield? Dividend Discount Model The market expects that companies similar to XYZ will display a rate of return of 13% per year What is the company's expected Growth Rate for Earnings & Dividends? What dividends will the company pay this year (DO) and be expected to pay next year (D1)? What is the estimated value of the stock today (T=0) using the Dividend Discount Model? What is the estimated value of the stock 1 year from today (T=1)?
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