You observe a stock price of $17. You expect a dividend growth rate of 5% and the next year's dividend was $1.70. What is the required return? A. 14.5% B. 15% C. 15.5%

Q: Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to…

A: The objective of this question is to calculate the expected price of a stock in year 4 using the…

Q: Calculate the value of a stock with the following expectations for dividend payments: $1.75 in Years…

A: Calculate the current stock price as follows: Current stock price = Year 1 dividend1+discount…

Q: A stock just paid a dividend of D0 = $1.50.  The required rate of return is rs = 10.1%, and the…

A: Current stock price is calculated using constant dividend growth model given below Current stock…

Q: A firm will start paying dividend of $3 per year from year-3. The return on equity is 15% and the…

A: Sustainable Growth Rate = Return on Equity * (1 - payout ratio) Sustainable Growth rate = 0.15*( 1 -…

Q: Next year's dividend is expected to be $2.14, g = 7%, and k = 12%. What is the stock's intrinsic…

A: Intrinsic Value = D1 /(ke-g) Where, D1 = Expected dividend

Q: 6) A stock just paid a dividend of $2.50. The required rate of return is 10.1%, and the constant…

A: Just paid dividend (D0) = $2.50Required return (r) = 0.101Growth rate (g) = 0.04Current stock price…

Q: If the dividend yield for year 1 is expected to be 7% based on a stock price of $30, what will the…

A: Dividend Amount = Stock price * Dividend yield Dn = D0 * ( 1 + Growth rate )n

Q: 5. The firm's expected year-end dividend is D, = P 1.60, its required retum is r, =11.00%, its…

A: Honor Code: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be…

Q: assume the current dividend is $4.00 and is expected to grow at a rate of 10% for three years and 6%…

A: Let Dn be the dividend in year 0. D0 = $4 D1 = $4(1.1) = $4.4 D2 = $4(1.1)^2 = $4.84 D2 = $4(1.1)^3…

Q: 4. The current price of a common stock is $50.20. The next year dividend is expected to be $2.30…

A: In the Given Question we require to calculate the required rate of return for a common stock A

Q: You are valuing a stock. If you expect the dividend one-year from today (at t=1) to be $3.00…

A: Dividend in Year 1 = d1 = $3Growth rate for next 10 years until Year 11 = g = 30%Constant Growth…

Q: You expect a share of stock to pay dividends of $3 in one year. After that dividends areexpected to…

A: Estimated stock price is the value per share that is expected to be paid by the investors whether…

Q: What comes closest to the value today of a stock that just paid a dividend of $1 and expects to grow…

A: Current price of share is the price which can be paid for purchase of the share. It is also called…

Q: The required return on a stock is equal to which one of the following if the dividend on the stock…

A: The required return on a stock is an important concept in finance that represents the minimum rate…

Q: You expect a stock to pay dividends of $0.80, $1.20, $1.85, $2.00 over the next 4 years. You will…

A: The price of a stock is the sum of the present value of future dividends.

Q: NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40.…

A: Given information,Dividend in year 1: Dividend in year 2: Rate of return: Growth rate: To…

Q: Target Corporation (TGT) just paid a $3.14 dividend, and it is expected to grow at 6.25% for the…

A: Solution: Given, Dividend paid per share = D0= $3.14 Growth rate of dividend for the next 3 years =…

Q: Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be…

A: As per Dividend Discount Model,P0= D1 / (ke-g)WhereD1 = Expected Dividendke = Expected Returng…

Q: Most recent dividend (D0) paid $5.16, if anticipated growth of 4.8 % is expected to be constant into…

A: according to gordon constant growth model: price of stock =D0×1+gr-g where, D0= recently paid…

Q: If Do = $2.25, g (which is constant) = 3.5%, and Po= $44, what is the stock's expected dividend…

A: Current price of stock is the price which can be paid for purchase of the stock. It is also called…

Q: Q2 A stock is expected to pay a dividend of $2 at the end of the year. The required rate of return…

A: Dividend growth Model is a method of valuation of stock with an assumption of a particular growth…

Q: What is the value of Company X stock if the dividend next year will be $3 and is expected to grow at…

A: Dividend to be paid next year= $3 Growth rate=4% Required return=9.08% Value of Company X stock=?

Q: A stock price is expected to pay a year-end dividend of 2.00$. The dividend is expected to decline…

A: Computation:

Q: Suppose the stock price is $ 95 and the continously compounded interest rate is 7 %. a) What is the…

A: Stock price (S) = $95 r = 7% T = 6 months = 0.5 years

Q: What is the value of Company X stock if the dividend next year will be $3 and is expected to grow at…

A: Dividend to be paid next year= $3Growth rate=4%Required return=9.08%Required:Value of Company X…

Q: A firm has just paid a $6.00 annual dividend. The dividend is projected to grow at 6.20% per year…

A: The DDM refers to the method of calculation of the value of stock based on the future dividends that…

Q: You are considering purchasing stock in a company that is expected to pay a $ 2.63 dividend later…

A: The dividend discount model will be used here. As per the dividend discount model the value of a…

Q: Connolly Co.'s expected year-end dividend is D1 = $1.00, its required return is rs = 11.00%, its…

A: growth rate = expected return - dividend yield = 11 - 6 = 5%dividend yield = dividend/pricePrice =…

Q: Solve for the stock price, P0, using the following information: D1: $3.31 D2: $3.94 D3: $4.76 D4:…

A: The objective of the question is to calculate the current stock price (P0) using the given dividends…

Q: Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be…

A: We will be using dividend discount model for this. Had it been a single stage dividend growth we…

Q: Company has the following dividend stream.   D1 = 1.81 D2 = 3.24 D3 = 4.64 D4 = 5.27…

A: The share price is the sum of the present value of future dividends and the present value of the…

Q: Suppose you have just purchased a share of stock for $58.50. You expect a dividend next period of…

A: Price of a stock is the PV of all future dividends. Now the dividends are expected to grow…

Q: Stock price=?

A: The constant growth model is a method for valuing the share price of a stock. It calculates the…

Q: Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be…

A: The dividend discount model will be used here. As per the dividend discount model the current value…

Q: If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to…

A: Price of a stock is the PV of future dividends. We can determine the price of the stock next year…

Q: 11. If XYZ company dividend for the next period = $2.3 per share, growth rate = 0.05, the required…

A: Given: Expected dividend = $2,3 Growth rate = 0.05 Required return = 11.3%

Q: If the next year's dividend was $2 per share and all future dividends will increase by 5%…

A: According to Gordon's growth model,Po =wherePo= price of stockD1 =dividend to be paidr= required…

Q: Company has the following dividend stream.   D1 = 1.15 D2 = 3.77 D3 = 4.39 D4 = 5.73…

A: Under dividend growth model, valuation of common stock is done by assuming that dividends keep…

Q: Connolly Co.'s expected year-end dividend is D₁ = $2.75, its required return is rs = 11.00%, its…

A: Expected dividend (D 1) = $2.75Required return = 11%Dividend yield = 6%

Q: Estimate the cost of equity if the share price is $50, the nextt annual dividend is expected to be…

A: Cost of Equity is also known as KE. It is that cost which is incurred by the company for financing…

Q: Design a spreadsheet similar to the one below to compute the value of a variable growth rate firm…

A: Present value is the current value of all future cash flows discounted for the years of maturity at…

Dividend Valuation

Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.

Dividend Discount Model

Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.  

Capital Gains Yield

It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.

Stock Valuation

In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.