Question

ABC Corporation expects to pay a dividend of $2 per share next year, and the dividend payout ratio is 80 percent. Dividends are expected to grow at a constant rate of 8 percent forever.Suppose the company's equity beta is 1.21, the market risk premius is 9%, and the risk free rate is 5%. Calculate the present value of growth opportunities.

Answer #1

ABC Corporation expects to pay a dividend of $2 per share next
year, and the dividend payout ratio is 80 percent. Dividends are
expected to grow at a constant rate of 8 percent forever.Suppose
the company's equity beta is 1.21, the market risk premius is 9%,
and the risk free rate is 5%. Calculate the present value of growth
opportunities.

Company ABC expects to pay a dividend per share of $10 next
year, which represents 100% of its earning. The expected return
from investors is 10%. The company's return on equity is 12%.
a) Calculate the price of a share assuming that the company pays
out 100% of its earning in dividend.
b) Calculate the price of a share if the company decides to
plowback 80% of its earning into the firm's operations and
investments.
c) Assuming a plowback ratio...

14.
FedEx expects to pay a dividend next year of $5.60 /share, which
would be a growth rate of 10%. The required return is 20%. The
value of a share of FedEx’s common stock is _________.
15.
The risk-free rate is 6%, the market return is 12% annually.
Hasbro has a beta of 1.3 expects to offer a constant dividend of
$5.20/share. Hasbro is being sued for copying other products and
the beta of the stock goes up to 1.6....

A company's recent dividend is $1 per share. The company expects
that the dividends will grow at 10% for the next three years. After
that the dividends will increase at 7% forever. Its stock beta is
1.0. Currently, the expected market return is 12%, and the
risk-free rate is 7%. What is the present value of the common
stock?

Stewart Industries expects to pay a $3.00 per share dividend on
its common stock at the end of the year (i.e. D1 =
$3.00). The dividend is expected to grow 25 percent a year until t
= 3,
after which time the dividend is expected to grow at a constant
rate of 5 percent a year (i.e. D3 = $4.6875 and
D4 = $4.9219). The stock’s beta is 1.2,
the risk-free rate of interest is 6 percent, and
the market...

Assume that Wansch Corporation is expected to pay a dividend of
$2.25 per share next year. Sale and profits for Wansch are
forecasted to grow at a rate of 20% for the next two years, then
grow at 5% per year forever thereafter. Dividends and sales growth
are expected to be equal. If Wansch's shareholders require 15%,
what is the per share value of Wansch's common stock?

A firm’s total annual dividend payout is $1 million. Its stock
price is $45 per share and it has 17,500,000 shares outstanding.
The firm earned $4 million in Net Income last year. This year, the
firm expects earnings to grow at 7%, with growth the year after
that expected to be 5%, and then in all following years, the firm
expects earnings to grow at 3%. The firm plans to hold their
dividend payout ratio constant over the coming 20...

Your firm is going to pay dividend $1
per share in the next year.
The current stock price is $10 per
share
Firm beta is 10% higher than market
average
Constant growth rate is 5%
Market risk premium is 10% and risk
free rate is 2%
Market value of common stock is $100
million and market value of debt is $200 million
No preferred stock
Cost of borrowing/issuing bond is
5%
Corporate tax rate 40%
What is the cost of...

Sisters Corp. expects to earn $6 per share next year. The firm’s
ROE is 15% and its plowback ratio is 60%. The firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant
dividend growth model.
b. Calculate the price with no growth.
c. What is the present value of its growth opportunities?

Sisters Corp expects to earn $6 per share next year. The firm’s
ROE is 15% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant dividend growth
model.
b. Calculate the price with no growth.
c. What is the present value of its growth opportunities?

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