Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 21, Problem 1P
Summary Introduction
To Determine: The current price of Corporation V’s stock.
Introduction: A stock is a common word used to represent the proprietorship statements of any organization. A share alludes to the stock declaration of a specific organization.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Hastings Corporation is interested in acquiring Visscher Corporation. Assume that the riskfreerate of interest is 4%, and the market risk premium is 5%.
Visscher currently expects to pay a year-end dividend of $1.99 a share (D1 =$1.99). Visscher’s dividend is expected to grow at a constant rate of 5% a year, and its betais 0.8. What is the current price of Visscher’s stock?
Gray Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $22.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
Question 2 options:
5.88%
4.25%
4.30%
4.90%
4.94%
15 ) Cash Cow Pty. is expected to pay out 100% of its earnings as dividends in perpetuity. The consensus analyst forecast is that next year's earnings per share, EPS1, will be equal to $3 while the company is expected to have an ROE equal to 10% in perpetuity. The long-term risk-free rate is 3% and the market risk premium is 5%. Assume that Cash Cow Pty's beta=1. According to the dividend discount model, Cash Cow Pty.'s intrinsic value per share is equal to:
Options -
$37.50
$30.00
$50.00
$12.50
Chapter 21 Solutions
Fundamentals of Financial Management (MindTap Course List)
Knowledge Booster
Similar questions
- Weber Integrated Systems Inc. is expected to pay a year-end dividend of $0.90 per share (i.e. D1 = $0.90), and that dividend is expected to grow at a constant rate of 4.00% per year in the future. The company's beta is 1.20, the market risk premium is 5.00 %, and the risk - free rate is 4.00 % . What is the company's current stock price? a. $15.00 b. $15.60 c. $16.33 d. $17.77 e. $ 18.20arrow_forwardAC&DC Company will be worth $135 per share one year from now. This company has a beta of 2.3. The risk-free rate is 5.5% and the market risk premium is 7.0%. Assuming CAPM holds and AC&DC does not pay dividends, how much are you willing to pay for one share today? Show your workings and round your final answer to two decimal places.arrow_forwardSuppose TB Pirates, Inc. is expected to pay a $2dividend in one year. If the dividend is expected togrow at 5% per year and the required return is 20%,what is the price?arrow_forward
- Okik Inc. has a beta coefficient of 1.0 and a required rate of return of 12 percent. The market risk premium is currently 8 percent. If the risk free rate increases by 2 percentage points, and Okik Inc. acquires new assets which increase its beta by 50 percent, what will be Okik’s new required rate of return? Give your answer in whole number, disregard the % sign e.g. 25% should be written as 25.arrow_forwardHarrison Corporation is interested in acquiring Van Buren Corporation Assume that the risk-free rate of interest is 5%, and the market risk premium is 6% Required 71 Van Buren currently expects to pay a year-end dividend of R2 00 per share (Di = 2 00) Van Buren's dividend is expected to grow at a constant rate of 5% per year, and its beta is 0 9 What is the current price of Van Buren's stock? 72 Harrson estimates that if it acquires Van Buren, the year-end dividend will remain at R2 00 per share, however, synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the current 5%) Harrison also plans to increase the debt ratio of what would be its Van Buren subsidiary, the effect of this would be to raise Van Buren's beta to 11 What is the per-share value of Van Buren to Harrison Corporation? 73 On the basıs of your answers to 7 1 and 72, d Harnson were to acquire Van Buren, what would be the range of possible prces it could bıd for each share of Van Buren…arrow_forwardSuppose Dragons, Inc. is expected to pay an annual dividend of $0.85 at t=1. Thereafter the dividend will increase at a growth rate g = 25% for two years, and at a growth rate g = 3% after two years. What should you pay for the stock at t=0 if the appropriate discount rate is 8%? Group of answer choices 24.47 18.98 27.47 34.67arrow_forward
- Suppose TB Pirates, Inc. is expected to pay a $2 dividend in one year. If the dividend is expected to grow at 5% per year and the required return is 15%, what is the price? Respuesta:arrow_forwardDyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.85, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price? Select the correct answer. a. $16.23 b. $16.70 c. $17.17 d. $15.29arrow_forwardQuestion is in the screen shotarrow_forward
- Dyer Furniture is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 2.00, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is Dyer's current stock price? Select the correct answer. a. $13.89 b. $12.83 c. $13.36 d. $11.77 e. $12.30 just give me the logic behind this dont give me the answer directlyarrow_forwardFurniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15%. The market risk premium is currently 5%. If the inflation premium increases by 2%, and Furniture Inc. acquires new assets that increase its beta by 50%, what will be Furniture Inc.'s new required rate of return? 14.50% а. b. 22.85% С. 18.75% d. 15.35% Plastic Inc.'sstock has an estimated beta of 2 with arequired rate of return is 12%. Paper Inc.'s stock has a beta of 1, and the risk-free rate is 2%. Determine the required rate of return on Paper Inc.'s stock? 7.0% а. b. 8.4% c. 10.0% d. 11.5% Company K has a beta of 1.6, while Company L's beta is 0.7. The risk-free rate is 7%, and current market premium is 5%. Currently, the expected rate of inflation built into the risk-free rate rises by 1%, the real risk-free rate remains constant, and the required return on the market rises to 14%. There is no change in the betas of both company. When these changes occurs, by how much will the required return on…arrow_forwardClinton Corporation is expected to pay a dividend of $3.50 next year and $5.50 the year after that. At this point (end of year 2 beginning of year 3) the growth rate in dividends is expected to be 0.05 into the foreseeable future. The required return on stock's of similar risk is 12%. What is the current price Po? Answer should be to nearest penny: ex: 20.32 Be sure to round correctly 20.326 would be 20.33 Your Answer: Answerarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning