Question

What is the value of a dividend stock that pays a dividend of: year 1 $3...

What is the value of a dividend stock that pays a dividend of:

year 1 $3
year 2 $3
year 2 $3.25
Then will grow at 1% thereafter. The WACC is 7% and the cost of equity is 9%.

Please show details of each step in Excel format.

Homework Answers

Answer #1

Price of share = Present Value of dividends and terminal value discounted at the cost of equity

Year 1 = 3

Year 2 = 3

Year 3 =3.25

Termina Value for the third year = Dividend in year3 * (1+g) / (cost of equity -g)

Please let me know in case you have any queries and I will be happy to assist you.

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
1. A company pays a $3 dividend on its common stock. This is also expected to...
1. A company pays a $3 dividend on its common stock. This is also expected to be the dividend next year. The second year, the dividend is expected to grow at 10%, then 8% the third year. Thereafter, the dividend will grow at 4% per year. If the required rate of return is 13%, how much would you pay for the stock? 2. A preferred stock pays a $3 dividend each year. The current required rate of return is 15%....
What is the value of a stock which pays a $4 dividend/year (first dividend in one...
What is the value of a stock which pays a $4 dividend/year (first dividend in one year), growing at 35% for 3 years, then growing at 2%/year thereafter, if the discount rate is 10%?
A stock just paid a dividend of $2.12. The dividend is expected to grow at 23.10%...
A stock just paid a dividend of $2.12. The dividend is expected to grow at 23.10% for five years and then grow at 3.25% thereafter. The required return on the stock is 10.24%. What is the value of the stock? Submit Answer format: Currency: Round to: 2 decimal places.
1. The preferred stock of Gandt Corporation pays a $ 1.75 dividend. What is the value...
1. The preferred stock of Gandt Corporation pays a $ 1.75 dividend. What is the value of the stock if your required return is 12 percent? The value of the preferred stock is-----per share.  ​(Round to the nearest​ cent.) 2. ​(Preferred stock valuation​) What is the value of a preferred stock when the dividend rate is 12 percent on a $ 100 par​ value? The appropriate discount rate for a stock of this risk level is 15 percent.The value of...
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...
Estimate the current true value of Geo Corp stock that you expect to pay a dividend...
Estimate the current true value of Geo Corp stock that you expect to pay a dividend of $1.80/share next year and grow at a 4%/year rate in the future. You believe the cost of equity is 7.0%. Please show work no excel
The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $3. This dividend is...
The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $3. This dividend is expected to grow at an annual rate of 15 percent for the next three years.The dividend is expected to increase by $1 in year 4 and to grow at a constant annual rate of 6 percent thereafter. If you require a 24 percent rate of return on an investment such as this, how much would you be willing to pay per share? how would...
You are considering the purchase of stock XYZ. XYZ pays a dividend of $1.00 and expects...
You are considering the purchase of stock XYZ. XYZ pays a dividend of $1.00 and expects to grow dividends by 6.0% each year. A stock of similar risk, ABC, currently trades at $55.79, pays a dividend of $3.25 per share, and expects to grow dividends by 3.0% each year. Determine the fair market price of stock XYZ, using the given data from stock ABC.
A company currently pays a dividend of $1 per share (D0 = $1). It is estimated...
A company currently pays a dividend of $1 per share (D0 = $1). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.6, the risk-free rate is 10%, and the market risk premium is 7%. What is your estimate of the stock's current price?
-Weston Corporation just paid a dividend of $3.25 a share (i.e., D0 = $3.25). The dividend...
-Weston Corporation just paid a dividend of $3.25 a share (i.e., D0 = $3.25). The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? D1 , D2, D3, D4, D5 - Tresnan Brothers is expected to pay a $1.70 per share dividend at the end of the year (i.e., D1 = $1.70). The dividend is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT