You've collected the following information from your favorite financial website. (The number next to the stock name is DO.) 52-Week Price Close Price 13.90 Div PE Net Hi Yld % Stock (Div) Palm Coal 0.36 Lake Lead Grp 1.54 SIR 2.55 Lo Ratio Chg -0.24 77.40 10.43 2.6 6. 55.81 33.42 3.8 10 40.43 -0.01 131.04 70.05 13.95 2.9 10 89.08 15.43 3.07 50.24 DR Dime 0.80 5.2 6. -0.26 Candy Galore 0.32 35.00 20.74 1.5 28 ?? 0.18 According to your research, the growth rate in dividends for SIR for the next five years is expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the nex five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume Investors require a return of 14 percent on SIR stock. According to your research, the growth rate in dividends for SIR for the next five years is expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume investors require a return of 14 percent on SIR stock. Requirement 1: According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current stock price %24
You've collected the following information from your favorite financial website. (The number next to the stock name is DO.) 52-Week Price Close Price 13.90 Div PE Net Hi Yld % Stock (Div) Palm Coal 0.36 Lake Lead Grp 1.54 SIR 2.55 Lo Ratio Chg -0.24 77.40 10.43 2.6 6. 55.81 33.42 3.8 10 40.43 -0.01 131.04 70.05 13.95 2.9 10 89.08 15.43 3.07 50.24 DR Dime 0.80 5.2 6. -0.26 Candy Galore 0.32 35.00 20.74 1.5 28 ?? 0.18 According to your research, the growth rate in dividends for SIR for the next five years is expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the nex five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume Investors require a return of 14 percent on SIR stock. According to your research, the growth rate in dividends for SIR for the next five years is expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume investors require a return of 14 percent on SIR stock. Requirement 1: According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current stock price %24
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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Question
Transcribed Image Text:You've collected the following information from your favorite financial website. (The
number next to the stock name is DO.)
52-Week Price
Div
Yld %
PE
Close
Net
Hi
Stock (Div)
Palm Coal 0.36
Lake Lead Grp
1.54
SIR 2.55
Ratio
Price
Chg
-0.24
Lo
77.40
10.43
2.6
6.
13.90
55.81
33.42
3.8
10
40.43
-0.01
131.04
50.24
70.05
2.9
5.2
10
89.08
3.07
13.95
DR Dime 0.8O
6.
15.43
-0.26
Candy Galore
0.32
35.00
20.74
1.5
28
??
0.18
According to your research, the growth rate in dividends for SIR for the next five years is
expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the next
five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume
Investors require a return of 14 percent on SIR stock.
According to your research, the growth rate in dividends for SIIR for the next five years is
expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the next
five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume
investors require a return of 14 percent on SIR stock.
Requirement 1:
According to the dividend growth model, what should the stock price be today? (Do not
round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Current stock price
Requirement 2:
Based on these assumptions, is the stock currently overvalued, undervalued, or correctly
valued?
(Click to select)
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