Question

A stock currently pays $1/year dividend. Suppose that you believe the company will increase the dividend...

A stock currently pays $1/year dividend. Suppose that you believe the company will increase the dividend 5% per year for the next two years then after that they will increase the dividend by 4% Forever......If you have a 7% DR (required return) the stock price today should be ?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
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...
New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend...
New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend of $5.40 per share exactly 5 years from today. After that, the dividends are expected to grow at 3.7 percent forever. If the required return is 12.3 percent, what is the price of the stock today?
Consider a company, which stock is currently trading at €8.00. The company has just paid a...
Consider a company, which stock is currently trading at €8.00. The company has just paid a dividend of €0.30 per share. You expect the dividend to increase by 10% for the next two years and then increase by 5% per year forever. Suppose that your required return in case of this company is 8%. Estimate the value of this company’s stock by using a two-stage Dividend Discount Model and judge whether this company’s stock is undervalued, fairly valued, or overvalued.
Question 1: Kai Zen Motors currently pays a dividend of $2 per share, and this dividend...
Question 1: Kai Zen Motors currently pays a dividend of $2 per share, and this dividend is expected to grow at a 20 percent annual rate for three years, and then at a 11 percent rate for the next two years, after which it is expected to grow at a 6 percent rate forever. What value would you place on the stock if a 16 percent rate of return were required? [5 Marks]
Your company just paid a dividend of $4.0 per share. The company will increase its dividend...
Your company just paid a dividend of $4.0 per share. The company will increase its dividend by 5% next year and will then increase its dividend growth rate by 2% points per year ( from 5% to 7% to 9% to 11%) until it reaches the industry average of 11% dividend growth, after which the company will keep a constant growth rate forever. The required return on your company’s stock is 13%. What will a share of stock sell for...
The preferred stock of Company A pays a constant $1.00 per share dividend. The common stock...
The preferred stock of Company A pays a constant $1.00 per share dividend. The common stock of Company B just paid a $1.00 dividend per share, but its dividend is expected to grow at 4 percent per year forever. Company C common stock also just paid a dividend of $1.00 per share, but its dividend is expected to grow at 10 percent per year for five years and then grow at 4 percent per year forever. All three stocks have...
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...
a) Visa Corp's next dividend will be $1.65 and they will increase it by $1.00 each...
a) Visa Corp's next dividend will be $1.65 and they will increase it by $1.00 each year for five years. After that they will increase the dividend at 4% forever. The required rate of return is 13%. What is the price of this stock today? b) What will the price of the stock be in one year?
Paper Corporation currently pays a dividend of $2 per share, and this dividend is expected to...
Paper Corporation currently pays a dividend of $2 per share, and this dividend is expected to grow at a 15 percent annual rate for three years, and then at a 10 percent rate for the next three years, after which it is expected to grow at a 5 percent rate forever. What value would you place on the stock if an 18 percent rate of return was required? (make a timeline)
Kai Zen Motors currently pays a dividend of $2 per share, and this dividend is expected...
Kai Zen Motors currently pays a dividend of $2 per share, and this dividend is expected to grow at a 13 percent annual rate for three years, and then at a 11 percent rate for the next two years, after which it is expected to grow at a 6 percent rate forever. What value would you place on the stock if a 16 percent rate of return were required?