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You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently

You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently

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
Section: Chapter Questions
Problem 1PS
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You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently
Transcribed Image Text:You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently
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