Question

Here is the timeline for (expected) dividends and the (expected) stock price at the end of...

Here is the timeline for (expected) dividends and the (expected) stock price at the end of 10 years: Years 0 1 2 3 4 5 6 7 8 9 10 $0 $5 $8 $3 $0 $2 $5 $4 $0 $0 $110 Discount rate is 12 percent. What is the present value of these cash inflows to the stockholder? Show the calculations.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Answer:

Calculation of present value of the cash inflows to the shareholders:
Year Cash flows Present value factor @12% Present value
0 0 1 1.0000 0.00
1 5 =1/(1+0.12)^1 0.8929 4.46
2 8 =1/(1+0.12)^2 0.7972 6.38
3 3 =1/(1+0.12)^3 0.7118 2.14
4 0 =1/(1+0.12)^4 0.6355 0.00
5 2 =1/(1+0.12)^5 0.5674 1.13
6 5 =1/(1+0.12)^6 0.5066 2.53
7 4 =1/(1+0.12)^7 0.4523 1.81
8 0 =1/(1+0.12)^8 0.4039 0.00
9 0 =1/(1+0.12)^9 0.3606 0.00
10 110 =1/(1+0.12)^10 0.3220 35.42
Total 53.87

So, the present value of the cash inflows to the shareholders is $53.87 (Answer)
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
Murray Telecom paid a $5.00 per share stock dividend last year (D0). These dividends are expected...
Murray Telecom paid a $5.00 per share stock dividend last year (D0). These dividends are expected to grow at a rate of 8 percent per year for the next 4 years, 5 percent per year for the subsequent 2 years, and then level off into perpetuity at a growth rate of 2 percent per year. What should be the value of the firm’s stock if the required rate of return on similar securities is 12 percent? Please show calculations!
Murray Telecom paid a $5.00 per share stock dividend last year (D0). These dividends are expected...
Murray Telecom paid a $5.00 per share stock dividend last year (D0). These dividends are expected to grow at a rate of 8 percent per year for the next 4 years, 5 percent per year for the subsequent 2 years, and then level off into perpetuity at a growth rate of 2 percent per year. What should be the value of the firm’s stock if the required rate of return on similar securities is 12 percent? Please show calculations!
Crown Company is growing quickly. Dividends are expected to grow 15 percent per year over the...
Crown Company is growing quickly. Dividends are expected to grow 15 percent per year over the next two years, 10 percent per year for the following three years, and 5 percent per year thereafter. The required rate of return (rs) on the stock is 9 percent, and the company recently paid a dividend of $4.00. (8 points)       a) Calculate the present value of each dividend for years 1-5.       b) Calculate the stock price as of the end of...
Hunter Petroleum Corporation paid a $2 dividend last year. The dividend is expected to grow at...
Hunter Petroleum Corporation paid a $2 dividend last year. The dividend is expected to grow at a constant rate of 5 percent forever. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). (Use a Financial calculator to arrive at the answers.) a. Compute the anticipated value of the dividends for the next three years. (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Anticipated value   D1...
The current price of a stock is $102.00. If dividends are expected to be $10 per...
The current price of a stock is $102.00. If dividends are expected to be $10 per share for the next 5 years, and the required return is 12%, then what should price of the stock be in 5 years when you plan to sell it? If the dividend and required return is expected to increase by $5 five years from now, does the current stock price also increase by $5? Why or why not?
Briley, Inc., is expected to pay equal dividends at the end of each of the next...
Briley, Inc., is expected to pay equal dividends at the end of each of the next two years. Thereafter, the dividend will grow at a constant annual rate of 4.5 percent, forever. The current stock price is $50. What is next year’s dividend payment if the required rate of return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next...
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next two years. Thereafter, the dividend will grow at a constant annual rate of 5.9 percent, forever. The current stock price is $64.    What is next year’s dividend payment if the required rate of return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next...
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next two years. Thereafter, the dividend will grow at a constant annual rate of 4.1 percent, forever. The current stock price is $46. What is next year’s dividend payment if the required rate of return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) dividend payment=
A stock has had the following year-end prices and dividends: Year Price Dividend 0 $ 43.29...
A stock has had the following year-end prices and dividends: Year Price Dividend 0 $ 43.29 - 1 48.27 $ .48 2 57.19 .51 3 45.27 .60 4 52.19 .65 5 61.27 .73 What are the arithmetic and geometric average returns for the stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Arithmetic average return ? % Geometric average return ?%
Assume you are considering a stock which oddly pays a dividend at the end of each...
Assume you are considering a stock which oddly pays a dividend at the end of each year. Your required rate of return is 8.5%. The expected dividend at the end of year 1 is $5.50. In year 2, the dividend is expected to grow by 11%. The year after that, the dividend is expected to be up 12%. In year 4 and 5 it is expected to grow at 15%. (1) If your holding period for this stock is 5...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT