Use the dividend discount model to value a share of Toyota’s stock (ticker symbol: TM) as of December 31, 2021. In your application of this model, use the data provided on the most recent Toyota Value Line report to estimate the necessary dividend payment and the firm’s equity beta. Assume, that the expected growth rate of dividends in perpetuity (g) ranges from 2.5% to 3.5%/year.

Use the dividend discount model to value a share of Toyota’s stock (ticker symbol: TM) as of December 31, 2021. In your application of this model, use the data provided on the most recent Toyota Value Line report to estimate the necessary dividend payment and the firm’s equity beta. Assume, that the expected growth rate of dividends in perpetuity (g) ranges from 2.5% to 3.5%/year.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 18MC

See similar textbooks

Similar questions

You decide to value Molson Coor's stock (ticker TAP) using the dividend discount model (DDM). To accomplish, you must first develop a dividend growth rate for a "high-growth period". If TAP's (annual) dividends in 2016 were $1.64 and in 2019 were $1.96, you decide this compound annual growth rate (CAGR) will be appropriate for the high growth period. (FYI you do not use 2020's dividend as it was reduced due to the pandemic.) You then confer with colleagues and through your research, agree that a 4.0% long-term (dividend) growth rate is appropriate as a constant growth rate after the high-growth period. As the last dividend (fiscal 2020) was reduced as stated, you estimate the next (annualized, fiscal 2021) dividends to be $1.71. You believe that this will grow by the high-growth CAGR for the next two years and thereafter, the growth rate will be constant (at the rate previously cited). If the capital asset pricing model (CAPM) shows TAP's cost of equity to be 5.42% calcuate the value…
Assume that a share of stock has just paid an annual dividend of $3.00 (Do), and that this dividend is expected to grow by $0.07 in each future year (i.e., $3.07 in Year 1, $3.14 in Year 2, $3.21 in Year 3, etc.). Also assume that investors require a 15.0 percent rate of return. Given this information, and using the Banko growth model, determine what the current price of this stock should be. Answer in XX.XX format, with no dollar sign. For example, if your answer is $18.29, enter "18.29".
Consider an example. Assume a share of preferred stock with the following characteristics: Par value $100 Dividend rate 3.0% per year Payment schedule semiannual Maturity date You are analyzing this preferred stock for possible purchase. Your required rate of return on this stock is 5% per year, compounded semiannually. Draw a time line showing the expected dividends for this preferred stock. Calculate the value of this preferred stock based on the required rate of return. Assume that the current market price for this preferred stock is $75 per share. Calculate the expected return based on the market price. Should you invest in the stock? Why or why not? Be sure to use your results from BOTH parts B and C above. You are analyzing a share of XYZ…
Assume you’ve forecasted the following Net Income amounts for Chipotle over the period 2021-2030. Assuming a beta of 1.28, a risk-free rate of 1.14% and a market risk premium of 4.72%. Assume Chipotle pays “dividends” each period equal to 5.24% of net income. The beginning book value of equity equals $2,020,135. Calculate residual income and the present value of each residual income amount. (Don’t forget to calculate book value of shareholders’ equity each period.) See attatched picture for work 2. Calculate the continuing value assuming a 3% growth rate.Step 1: Multiply Net Income for 2030 by (1+g)Step 2: Multiply Book Value of Shareholder’s Equity at end of 2030 by RE (cost of equity).Step 3: Subtract Step 2 amount from Step 1 amount. This is the continuing residual income.Step 4: Assume the Step 3 amount is a perpetuity with growth (this amount will grow forever at a constant rate). Divide the Step 3 amount by (RE-g). It will be a big number. 3. Add…
A company has an issue of preferred stock outstanding that pays a $2.30 dividend every year in perpetuity. If this issue currently sells for $41.82 per share, what is the required rate of return? Please use a HP 10bii+ Financial Calculator
Assume that you are given the following dividends for your company's common stock for Years 1-5. Also assume that after Year 5, dividends will then grow at a constant growth rate of 4.0 percent. Now assume that the investors require a rate of return of 17.0 percent. Given this information. determine the current price for a share of your company's stock. Year 1 2 3 4 5 O $29.75 O $30.58 $25.46 O $27.44 O $23.72 Dividend $2.40 $3.20 $3.90 $4.50 $5.00
Using the Value Line Investment Survey report in Exhibit 11.5, find the following information for Apple. What was the amount of revenues (i.e., sales) generated by the company in 2017? What were the latest annual dividends per share and dividend yield? What is the earnings per share (EPS) projection for 2019? How many shares of common stock were outstanding? What were the book value per share and EPS in 2017? How much long-term debt did the company have in the third quarter of 2018?
Consider the following security, which you expect will grow rapidly for three years followed by a steady growth indefinitely. Emerson Tool and Die Company Earnings Per Share, 2020 $2.50 Dividend Payout Rate $0.60 Extradordinary Growth Rate 0.35 Sustainable Growth Rate 0.05 Market Capitalization Rate 0.15 Required: Using the information in the tables above, please calculate the cash flows per period and the price of this stock. (Use cells A5 to B9 from the given information to complete this question.) Time Cash Flow 1 2 3 Horizon Value Present Value (Price)
Given the information below for Sugar Rush, compute the expected share price by the end of 2023 using price P/E. Assume that the historical arithmetic average growth rates will remain the same. For 2018, the EPS was $4.50. Hint: calculate the average EPS growth rate and the average P/E. Year Price EPS $96.50. $74.25. $98.00. $80.85. $100.00. $106.70. 2019 $65 $4.50 2020 $58 $4.00 2021 $76 $5.50 2022 $98 $6.00
You buy a share of The Ludwig Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.22 at the end of 3 years. a. Calculate the growth rate in dividends. b. Calculate the expected dividend yield. c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock’s expected total rate of return? (Assume the market is in equilibrium with the required return equal to the expected return.)
An analyst produces the following series of annual dividend forecasts for company D: Expected dividend (end of) year t+1 = 10 euros; Expected dividend (end of) year t+2 = 20 euros; Expected dividend (end of) year t+3 = 10 euros. The analyst further expects that company D dividend will grow indefinitely at a rate of 2 percent after year t+3. Company D cost of equity equals 10 percent. Under these assumptions, calculate the analysts estimate of company D equity value at the end of year t.
Dear Bartleby, I need help calculating the dividend yield e. If Wiper's stock had a price/earnings ratio of 14 at the end of 2020, what was the market price of the stock? (Round intermediate calculations and final answer to 2 decimal places.)f. Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e. (Round intermediate calculations and final answers to 2 decimal places. Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 2020 2019 2018 Current assets $ 650 $ 900 $ 700 Other assets 2,750 2,050 1,750 Total assets $ 3,400 $ 2,950 $ 2,450 Current liabilities $ 500 $ 800 $ 700 Long-term liabilities 1,500 1,000 800 Stockholders' equity 1,400 1,150 950 Total liabilities and stockholders' equity $ 3,400 $ 2,950 $ 2,450…