Question

A company just paid a dividend of $3.50 per share on its stock. The dividends are...

  1. A company just paid a dividend of $3.50 per share on its stock. The dividends are expected to grow at a constant rate of 3.6% per year. (i) If the required rate of return is 11.6%, what is current price? (ii) What will be the price of this stock in five years? (iii) You own 10 stocks of the company., and were planning to hold these stocks for 5 years before you sell. Suppose your friend is willing to buy all the 10 shares for $54 per share. Would you sell these shares to your friend, or would you hold these shares for 5 years?
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
Murray Telecom just paid a $3.50 per share stock dividend (D0). Dividends are expected to grow...
Murray Telecom just paid a $3.50 per share stock dividend (D0). Dividends are expected to grow at a rate of 8 percent per year for the next 6 years, 4 percent per year for the subsequent 4 years, and then level off into perpetuity at a growth rate of 2 percent per year. Using the dividend growth model, what should be the value of the firm’s common stock if the required rate of return on similar securities is 11.25 percent?
Bronze Company Ltd last paid a dividend of $0.20 per share. This dividend is expected to...
Bronze Company Ltd last paid a dividend of $0.20 per share. This dividend is expected to grow at 15% per annum for three years, then at 10% per annum for the next three years, after which it is expected to grow at a 5% rate forever. REQUIRED: (i) Calculate the price you would pay for the share if your required rate of return is 10%? (ii) Calculate the price you would pay for the share if you expected to hold...
The Jackson Company has just paid a dividend of $3.00 per share on its common stock,...
The Jackson Company has just paid a dividend of $3.00 per share on its common stock, and it expects this dividend to grow by 10 percent per year, indefinitely. The firm has a beta of 1.50; the risk-free rate is 10 percent; and the expected return on the market is 14 percent. The firm's investment bankers believe that new issues of common stock would have a flotation cost equal to 5 percent of the current market price. How much should...
A firm just paid a $10 per share dividend, and the stock currently sells for $100...
A firm just paid a $10 per share dividend, and the stock currently sells for $100 per share. Dividends are expected to grow at a 10% annual rate for the next five years. What price must you be able to sell the stock for at the end of the 5 years in order for the stock to be fairly valued based on a 15% cost of equity?
19. The company just paid a dividend of $2.60 per share on its stock. The dividends...
19. The company just paid a dividend of $2.60 per share on its stock. The dividends are expected to grow at a constant rate of 3% per year forever. The required rate of return for this stock is 15%.What is expected dividend payment at the end of year 4?(Round answers to two decimals, enter your answers without any characters such as "$", or "," such as 1234.78) 12. A corporate bond offers 9% coupon rate, compounded semi-annually. The maturity left...
KayCee paid a dividend yesterday of $3.50 per share. The dividend is expected to grow at...
KayCee paid a dividend yesterday of $3.50 per share. The dividend is expected to grow at a constant rate of 10% per year. The price of KayCee's common stock today is $40 per share. If KayCee decides to issue new common stock, flotation costs will equal $4.00 per share. KayCee's marginal tax rate is 35%. Based on the above information, the cost of new common stock is?
APCE common stock just paid a dividend of $1.00 per share, but its dividend is expected...
APCE common stock just paid a dividend of $1.00 per share, but its dividend is expected to grow at 10 percent per year for four years and then grow at 6 percent per year forever. How much should you be willing to pay for the APCE stock? Assume 12% required return. 20.24 27.29 16.62 25.83
The Herjavec Co. just paid a dividend of $1.35 per share on its stock. The dividends...
The Herjavec Co. just paid a dividend of $1.35 per share on its stock. The dividends are expected to grow at a constant rate of 3 percent per year indefinitely. Investors require a return of 10 percent on the company's stock. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current price           $   What will the stock price be in three years? (Do not round intermediate calculations...
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. IBM pays dividends once a year. The company just paid a dividend of $3.50 and...
1. IBM pays dividends once a year. The company just paid a dividend of $3.50 and management expects this dividend to grow at a constant rate of 6.5 percent forever. If the required rate of return is 15 percent, what is the price of this stock? 2. An investment requires you to deposit $5,000 into an account today. If the compound rate of growth is 8 percent per year, what will this investment be worth in 30 years?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT