Question

Using the dividend discount model, calculate the intrinsic value for the stock today. today is 2017,...

Using the dividend discount model, calculate the intrinsic value for the stock today.

today is 2017, you have just been paid a dividend and that the next dividends will be received in exactly one year. (dividend is paid annually) the stock price at 2017 was$ 38.3. dividend pay per share is $1.39. you expect the stock to maintain the same dividend payout ratio(60.8399) as 2017 for the next three years. After three years, the company will increase the dividend payout ratio to 70%. Assume the company's return on new investment is 16.6% and the required rate of return is 10%.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
according to discount dividend model,please calculate the intrinsic value for stock today,now is 2015 stock today.now...
according to discount dividend model,please calculate the intrinsic value for stock today,now is 2015 stock today.now the stock price is 38.3,roe is 16.6%,required return is 10%,dividend is 1.39.DPR is 60.8339.In 2016, dividend is 1.547,DPR is 60.9294,in 2017, dividend is 1.695,DPR is 61.1693.assume that the DPR will increase to 70% in 2018.
Dividend discount model A stock will not pay dividends until three years from now. The dividend...
Dividend discount model A stock will not pay dividends until three years from now. The dividend then will be $2.00 per share, the dividend payout ratio will be 40 percent, and return on equity will be 15 percent. If the required rate of return is 12 percent, which of the following is closest to the value of the stock?
What are the limitations of the dividend discount model? A stock currently pays a dividend of...
What are the limitations of the dividend discount model? A stock currently pays a dividend of $4 for the year. Expected dividend growth is 20% for the next three years and then growth is expected to revert to 4% thereafter for an indefinite amount of time. The appropriate required rate of return is 10%. What is this stock’s intrinsic value? What is the rate of return on an investment that costs $500 and is sold after 1 year for $560?
In practice, the use of the dividend discount model is refined from the method presented in...
In practice, the use of the dividend discount model is refined from the method presented in the textbook. Many analysts will estimate the dividend for the next 5 years and then estimate a perpetual growth rate at some point in the future, typically 10 years. Rather than have the dividend growth fall dramatically from the fast growth period to the perpetual growth period, linear interpolation is applied. That is, the dividend growth is projected to fall by an equal amount...
Nina, a lead fundamental analyst was trying to calculate the intrinsic value of ABC Co. stock....
Nina, a lead fundamental analyst was trying to calculate the intrinsic value of ABC Co. stock. She had learnt about dividend discount models as an application of time value of money to price equity instruments. She projected the expected dividends which ABC Co. will be paying. ABC Co. is expected to pay a dividend of $5 at the end of second year with an expected dividend payment of zero for first year. The dividend is expected to grow at 5%...
1- In practice, a common way to value a share of stock when a company pays...
1- In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.15. The dividends are expected to grow at 10 percent over the next five years. The company has a payout ratio of 40 percent and a benchmark PE of 19. The required...
Using the Dividend Valuation Model, calculate the following: What is the value of a common stock...
Using the Dividend Valuation Model, calculate the following: What is the value of a common stock that paid a $1.50 dividend at the end of the last year and is expected to pay a cash dividend in the future. Dividends are expected to grow at 7% annually and the investor’s required rate of return is 11%.
A firm's stock has a required return of 10.00%. The stock's dividend yield (using the dividend...
A firm's stock has a required return of 10.00%. The stock's dividend yield (using the dividend to be paid in one year from today) is 5.50%. What is the amount of the dividend just received if the current stock price is $36 and the dividends grow annually at a constant rate?
Use the variable growth model to predict the intrinsic value of the Rhyhorn company stock. Assume...
Use the variable growth model to predict the intrinsic value of the Rhyhorn company stock. Assume that dividends will grow at a variable rate for the next three years (2019, 2020, 2021). After that, the annual rate of growth in dividends is expected to be 6% and stay there for the forseeable future. Starting with the latest (2018) annual dividend of $2.06 pershare, Rhyhorn's earnings and dividends are estimated to grow by 17% in 2019, by 12% in 2020, and...
Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected...
Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%. Given that the last dividend paid was $0.5, at what price would the analysts currently value the stock under their own expectations?