Question

Consider a stock that is planning to make its next dividend payment $3.25. They plan to...

Consider a stock that is planning to make its next dividend payment $3.25. They plan to increase the dividend by 30% for one year and then by 15% each year for three years. After that, they will level off to a constant growth rate of 4% in dividends per year forever. The required return on the stock is 15%.

1.Trace stock price, dividend yield, and capital gains yield for each year from today until 10 years from now. Explain what is happening with each of these at different points in time.

2. Suppose that the actual price of this stock today (the market price) is $25. What is the implied required return on the stock?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a stock that is planning to pay a dividend of $3 at the end of...
Consider a stock that is planning to pay a dividend of $3 at the end of this year. After that, dividends will grow at a fixed rate of 4.5% per year indefinitely. The required return on the stock is 11%. a. What is the value of the stock today, in 5 years, and in 8 years? b. What are dividend yield and capital gains yield yield this year, in 5 years, and in 8 years?
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The...
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The dividends are expected to grow at a constant rate of 3 percent per year, indefinitely. If investors require a 12 percent return on Courageous stock, what is the current price? What will the price be in 3 years? In 15 years? PART A: Current Price: $____________. PART B: Price in Three Years: $____________. PART C: Price in Fifteen Years: $____________. #4 Stock Values The...
Using the following information to evaluate a stock price. A stock just paid its dividend of...
Using the following information to evaluate a stock price. A stock just paid its dividend of $2.00 and its required return is 13%. If the growth rate g = 0%, in other words, the dividend is constant at $2.00, what is the stock price? 837 What if g is constant and is 6%? 33.3333 What is the dividend yield and what is the capital gains yield for b? Assume g is non-constant, the growth rate is 30% for Year 0...
"A young software company will pay its first dividend of $0.60 next year. This dividend of...
"A young software company will pay its first dividend of $0.60 next year. This dividend of $0.60 will grow at a rate of 10% for four years until the end of year 5. After that, the growth will slow down to 5% forever. The required rate of return is 15%. What is the price of the stock today?" $6.98 $7.14 $7.31 $7.62 $7.97
Consider the stock of SLB Inc., a growth stock that will pay no dividend the next...
Consider the stock of SLB Inc., a growth stock that will pay no dividend the next year. Starting in year two, the company will pay a dividend of $3 and will increase it by 10% for the next three years. Afterwards, dividends will grow by 5% per year indefinitely. The stock has a required rate of return of 15%. Answer the following questions. (SHOW YOUR WORK. Correct answers with no formulas/calculations receive no credit) a) What is the value (price)...
4. Burnett Corp. pays a constant $29 dividend on its stock. The company will maintain this...
4. Burnett Corp. pays a constant $29 dividend on its stock. The company will maintain this dividend for the next 15 years and will then cease paying dividends forever. If the required return on this stock is 14 percent, what is the current share price? $203.06 $187.03 $178.12 $174.56 $435.00 11. CDB stock is currently priced at $77. The company will pay a dividend of $5.37 next year and investors require a return of 11.8 percent on similar stocks. What...
Metal Bearings, Inc. just paid a dividend of $1.08 on its stock. The dividends are expected...
Metal Bearings, Inc. just paid a dividend of $1.08 on its stock. The dividends are expected to grow 19.2% per year for the next three years and then level off to a growth rate of 5.6% indefinitely. If the required return is 14.3%, what is the stock price today?
ABC Company is experiencing a rapid growth. The first dividend will be paid next year (at...
ABC Company is experiencing a rapid growth. The first dividend will be paid next year (at year . After that, dividends are expected to grow at 20% per year during the next two years (years 2 and 3), and then 5% per year indefinitely. The required rate of return on this stock is 15%, and the stock is currently selling for 50TL. What is the expected dividend for the coming year (Div1)? (5 points) What is the expected price of...
A stock just paid an annual dividend of $1.3. The dividend is expected to grow by...
A stock just paid an annual dividend of $1.3. The dividend is expected to grow by 9% per year for the next 4 years. The growth rate of dividends will then fall steadily from 9% after 4 years to 3% in year 8. The required rate of return is 12%. What is the stock price if the dividend growth rate will stay 3% forever after 8 years?
​​​​​ Using the following information to evaluate a stock price. A stock just paid its dividend...
​​​​​ Using the following information to evaluate a stock price. A stock just paid its dividend of $2.00 and its required return is 13%. Assume g is non-constant, the growth rate is 30% for Year 0 to Year 1, 25% for Year 1 to Year 2, 15% for Year 2 to Year 3, and then long-run constant g = 6%, what is the stock price? Assume that the dividends are growing at 10% for the first two years and then...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT