Question

Verona Industries just paid a dividend of $0.95. You expect the dividend to grow at 18% for the next two years, and then the dividend will grow at 6.00% for the foreseeable future. You estimate the appropriate discount rate is 12.10%. Using this information you estimate the current price for Verona is closest to:

A.

$23.83.

B.

$21.50.

C.

$29.37.

Answer #1

**The price is computed as shown below:**

**= Dividend in year 1 / (1 + discount rate) ^{1} +
Dividend in year 2 / (1 + discount rate)^{2} + 1 / (1 +
discount rate)^{2} [ (Dividend in year 2 (1 + growth rate)
/ (discount rate - growth rate) ]**

= ($ 0.95 x 1.18) / 1.1210^{1} + ($ 0.95 x
1.18^{2}) / 1.1210^{2} + 1 / 1.1210^{2} [
($ 0.95 x 1.18^{2} x 1.06) / (0.1210 - 0.06) ]

= $ 1.121 / 1.1210 + $ 1.32278 / 1.1210^{2} + 1 /
1.1210^{2} [ $ 22.98601311 ]

= $ 1.121 / 1.1210 + $ 24.30879311 / 1.1210^{2}

**= $ 20.34 Approximately**

Feel free to ask in case of any query relating to this question

Verona Industries just paid a dividend of $0.95. You expect the
dividend to grow at 18% for the next two years, and then the
dividend will grow at 6.00% for the foreseeable future. You
estimate the appropriate discount rate is 12.10%. Using this
information you estimate the current price for Verona is closest
to:
A.
$21.50.
B.
$29.37.
C.
$23.83.

Verona Industries just paid a dividend of $1.80. You expect the
dividend to grow at 12% for the next two years, and then the
dividend will grow at 5% for the foreseeable future. You estimate
the appropriate discount rate is 10.75%. Using this information you
estimate the current price for Verona is closest to: A. $37.88. B.
$50.06. C. $41.53.

1. Verona Industries just paid a dividend of $2.5 per common
share. you expect the dividend to grow at 14% per year for the next
2 years and then the dividend will grow at 4% for the foreseeable
future. You estimate the appropriate discount rate is 9.80% per
year. Using information you estimate the current price for Verona
is closet to:
A: $52.25
B.$48.02
C:$61.99
2.
An advantage of the payback period method for accepting and
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expect the company's dividend to grow by 30% this year, by 10% in
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Mack Industries just paid a dividend of $5 per share (D0 = $5).
Analysts expect the
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After two years the dividend is expected to grow at a constant
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DesJarlais Inc just paid an annual dividend of $4.65. You expect
dividends to grow at 18% for the next two years, then at a
sustainable 4.75% after that. The expected return on the stock is
10.29%. The per share value of DesJarlais is closest to:
A) $110.94. this is
answer
B) $132.72.
C) $101.55.
Period
1
2
3+
Div
4.65(1.18)
4.65(1.18)2
4.65(1.18)2(1.0475)
PV @ 10.29%
4.9751
5.3229
122.4225 (TV)
PV of TV
100.6442
Total
110.94
Please, can anybody help me...

Nachman Industries just paid a dividend of D0 =
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thereafter. The required return on this low-risk stock is 9.00%.
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Please show work

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