Question

Suppose a company is expected to grow at 25% for the next two years and then...

Suppose a company is expected to grow at 25% for the next two years and then will have a constant growth of 8%. The company paid dividends of $0.75 this year. If the required rate of return is 10%, what is the value of the stock today?

A) $52.45

B) $54.12

C) $60.82

D) $62.35

Sam is considering purchasing a call option on ABC stock. The call has a premium of $3, an exercise price of $50, and ABC is trading at $51 per share. Which of the following statements about the call option is correct?

A) The call has an intrinsic value of $1 and a time value of $2.

B) The call has an intrinsic value of $0 and a time value of $3.

C) The call has an intrinsic value of $3 and a time value of $2.

D) The call has an intrinsic value of $0 and a time value of $1.

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
A company’s dividend is expected to grow at 20% for the next six years. After that,...
A company’s dividend is expected to grow at 20% for the next six years. After that, the growth is expected to be 3% forever. If the required return is 10%, what is the value of the stock at time 6? The dividend just paid was $1. A company’s dividend is expected to grow at 20% for the next six years. After that, the growth is expected to be 3% forever. If the required return is 10%, what is the value...
The OWB Company paid $2.1 of dividends this year. If its dividends are expected to grow...
The OWB Company paid $2.1 of dividends this year. If its dividends are expected to grow at a rate of 3 percent per year, what is the expected dividend per share for OWB five years from today? The current price of ABC stock is $35 per share. If ABC’s current dividend is $1.5 per share and investors ‘required rate of return is 10 percent, what is the expected growth rate of dividends for ABC. Use constant dividend growth model. Consider...
1. A put option has an exercise price of $30 and a stock price of $25....
1. A put option has an exercise price of $30 and a stock price of $25. If the put option is trading for $5.25, what is the intrinsic value of the option? a. $1 b. $2 c. $3 d. $5 2. A call option has an exercise price of $30 and a stock price of $34. If the call option is trading for $5.25, what is the intrinsic value of the option? a. $0.00 b. $1.25 c. $4.00 d. $5.25...
Over the next 1 year, the dividend of another company DeVille PLC is expected to grow...
Over the next 1 year, the dividend of another company DeVille PLC is expected to grow at 9% per annum (i.e., per year). After that, the dividend growth of this company will decline to 4%. The required return is expected to stay constant at 5% per annum. The company's last paid dividend is 20p per share. What is the intrinsic value of the stock today, P0 ? A. 2275p B. 2180p C. 1870p D. 1814p E. None of the above
1.) Firm Y's dividend is expected to grow at a rate of 12% per year over...
1.) Firm Y's dividend is expected to grow at a rate of 12% per year over the next 3 years and then slow to a growth rate of 4% perpetually. The company's cost of equity is 11% and the annual dividend that has just been paid was $2.95. The estimated present value at time 2 of all future dividends beyond that point in time is? Multiple Choice $55.06 $59.21 $67.50 $64.54 2:) Firm Y's dividend is expected to grow at...
fast grow corporation is expecting dividends to grow at 20% rate for the next two years....
fast grow corporation is expecting dividends to grow at 20% rate for the next two years. the corporation just paid a $2 dividend and the next dividend will be paid one year from now. after two years of rapid growth, dividends are expected to grow at a constant rate 9%forever. if the required return is 14%, what is the value of fast grow corporation common stock today?
A firm has just paid a dividend of 11, dividends are expected to grow at 3%...
A firm has just paid a dividend of 11, dividends are expected to grow at 3% in the future. If the firm has a beta of 0.8 and the market risk premium and risk free rate are 10.7% and 3.2% respectively, then what is the intrinsic value of this firm today?
Blossom Inc., is expected to grow at a rate of 18.000 percent for the next five...
Blossom Inc., is expected to grow at a rate of 18.000 percent for the next five years and then settle to a constant growth rate of 9.000 percent. The company recently paid a dividend of $2.35. The required rate of return is 14.000 percent. Present value of dividends is $13.05 Value of stock is $117.20 What is the value of the stock today?
Suppose the company is facing a fast growth of 22% per year for the next 4...
Suppose the company is facing a fast growth of 22% per year for the next 4 years. After that the growth becomes constant 0%. Company's beta is 1.2; market risk premium is 5.5% and risk-free rate is 3%. Last dividend (Do) is $1.25 per share. Find: a. Find required rate of return using CAPM; b. Horizon stock price at time 4; c. Intrinsic stock value today. a. Required return = rS = rRF + b(RPM) = ? Year 0 1...
McGaha Enterprises expects earnings and dividends to grow at a rate of 25% for the next...
McGaha Enterprises expects earnings and dividends to grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company's last dividend, D 0, was $1.40, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the current price of the common stock? Answers: a. $29.23 b. $30.21 c. $27.89 d. $26.09 e. $31.42
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT