Question

XYZ company is expected to pay a dividend per share of $1.1 for the coming year. It expected that company can maintain a dividend growth of 15% a year for the next 3 years. Given an in-depth analysis, it comes to term that the growth rate will decline to 5 per cent per annum and remains at that level indefinitely. The required rate of return on the shares is 12 per cent per annum.

- Calculate the current share price.
- If the market for the company is $20.00, will you recommend to buy this stock?

Answer #1

i. **The current share price = $21.3417**

It is equal to the present value of future dividends.

Dividend discount model

ii. Yes, we would recommend to buy this stock at a market price
of $20 because the value of each share is
**$21.3417**

A business is to pay a dividend per share of $1.1 for the
upcoming year. It's expected they can maintain a dividend growth of
15% each year for the next 3 yrs. It comes to term that the growth
rate is going to decrease to 5 per cent p.a. and remains at that
level forever. The required rate of return on the shares is 12 per
cent p.a.
What is the current share price
If the market is $20.00, should...

To please be done in excel: XYZ Ltd. is expected to pay a
dividend of $8.00 per share in the coming year and a $9.00 dividend
in the year thereafter. Afterwards, the company is expected to
maintain a constant 5 per cent growth rate in dividends forever. If
the required return on the share is 10 per cent, what is the fair
value of the share?

A company XYZ paid a dividend of Rs.12 per share
yesterday and is expected to pay dividend once per year in the
future (at same calendar date as this year) which will grow at a
rate 5% to eternity.
a)
Draw the cash flow diagram.
(1)
b)
If the expected market return is 12%, the risk-free rate is 5%, and
the CAPM beta of the company XYZ is 0.8, what is the expected
return on equity of the company?
(2)...

XYZ company is about to pay a dividend of $6.59 per share. The
dividend is expected to grow at a rate of 16 percent annually. If
the current cum-dividend stock price of XYZ is $89.01, what is the
required rate of return?

Company XYZ is expected to pay a cash dividend of $0.50 per
share at the end of this year. Investors require a 15% return. If
the dividend is expected to grow at a steady 6% per year, what is
the current value of a share?

XYZ Corporation is expected to pay a dividend in Year 1 of
$3.00, a dividend in Year 2 of $2.00, and a dividend in Year 3 of
$1.00. After Year 3, dividends are expected to decline at the rate
of 2% per year. An appropriate required return for the shares is
8%. How much the shares should be worth today?

You expect Sharp Steel Company to pay a dividend of $2.37 per
share next year. You expect the dividend to grow 10% the following
year, 7% the year after that, and then level off to a growth rate
of 4% indefinitely. Sharp has a beta of 1.4, the risk-free rate of
return is 1.1% and the market risk premium is 5.7%.
a) What is Sharp Steel's stock worth?
b) If Sharp's stock was currently trading for $62.10,
would you buy...

Maynard Steel plans to pay a dividend of $3.17 this year. The
company has an expected earnings growth rate of 4.2% per year and
an equity cost of capital of 9.3%.
a. Assuming Maynard's dividend payout rate and expected growth
rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.01 this year
and use the remaining $2.16 per share to repurchase shares. If...

Maynard Steel plans to pay a dividend of $3.16 this year. The
company has an expected earnings growth rate of 3.6% per year and
an equity cost of capital of 10.4%.
a. Assuming that Maynard's dividend payout rate and expected
growth rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.07 this year
and use the remaining $2.09 per share to repurchase shares....

Analysts estimate that XYZ will pay a dividend
amounting to 10 m.u. per share in 12 months. Due to planned
investments, the company does not intend to pay any dividend at the
end of the second and the third year. Analysts assume that the
company will thereafter be able to pay a fixed dividend amounting
to 20 m.u. per share for an indefinite number of years. Price the
XYZ share taking into account that market expected rate of return
on...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 5 minutes ago

asked 11 minutes ago

asked 19 minutes ago

asked 36 minutes ago

asked 38 minutes ago

asked 38 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago