Question

. Suppose a stock is not paying any dividend now and it will not pay any...

. Suppose a stock is not paying any dividend now and it will not pay any in the next nine years. Exactly 10 years from now, shareholders will receive a cash dividend of $1 per share. The cash dividend will grow at 5% per year after that. That is, investors will receive $1.05 per share 11 years from now and so on. What is the price of the stock today if the discount rate is 10% per year?

A. $20
B. $21
C. $7.71
D. $8.48
E. $8.91

Please attach the problem-solving process

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Based on the given data, pls find below steps, workings and anwer:

The price of the stock today is $ $ 8.48 Answer (D)

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
Miller Juice, Inc. is not paying a dividend right now, but is expected to pay a...
Miller Juice, Inc. is not paying a dividend right now, but is expected to pay a $4.56 dividend three years from now. Investors expect that dividend to grow by 4% every year forever. If the required return on the stock investment is 14%, what should be the price of Miller Juice stock today? Group of answer choices $43.84 $53.69 $36.49 $47.42
GHI Ltd. is not currently paying a dividend. In five years, it expects to pay a...
GHI Ltd. is not currently paying a dividend. In five years, it expects to pay a dividend of $0.50, and dividends are expected to grow at 4% a year afterward. If the return demanded is 12%, what should GHI be worth today? Our company projects the following FCFs for the next 3 years: $5,000,000; $5,500,000; $6,000,000. Future growth is expected to slow to 5% beyond year 3. What is the terminal value of the company in year 3 if the...
A stock will pay no dividends for the next 3 years. Four years from now, the...
A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $2.2. It is expected to pay a dividend of $2.7 exactly five years from now. The dividend is expected to grow at a rate of 6% per year forever after that point. The required return on the stock is 13%. The stock's estimated price per share exactly TWO years from now, P2...
A stock will pay no dividends for the next 3 years. Four years from now, the...
A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $1.9. It is expected to pay a dividend of $3 exactly five years from now. The dividend is expected to grow at a rate of 7% per year forever after that point. The required return on the stock is 15%. The stock's estimated price per share exactly TWO years from now, P2...
Currently, a company is not paying a dividend. It will start paying a $2.20 dividend per...
Currently, a company is not paying a dividend. It will start paying a $2.20 dividend per share in two years. After that, the dividend is expected to grow at a constant rate of 3% per year. The required return is 8%. What is the current value of the company’s stock?
A stock is expected to pay a dividend of $2.3 one year from now, and the...
A stock is expected to pay a dividend of $2.3 one year from now, and the same amount every year thereafter. The stock's required return (indefinitely) is expected to be 9.5%. The stock's predicted price exactly 5 years from now, P5, should be $_______________. A stock is expected to pay a dividend of $1.2 one year from now, $1.6 two years from now, and $2.4 three years from now. The growth rate in dividends after that point is expected to...
Nike will pay an annual dividend of $0.95 one year from now. Analysts expect this dividend...
Nike will pay an annual dividend of $0.95 one year from now. Analysts expect this dividend to grow at 6% per year for three years. Thereafter, growth will slow down to 2% per year and remain there for the foreseeable future. According to the dividend discount model, what is the value of a share of Nike stock today if the firm’s cost of equity capital is 9.0%? Do not use Excel, formulas only
Carter Communications does not currently pay a dividend. You expect the company to begin paying a...
Carter Communications does not currently pay a dividend. You expect the company to begin paying a dividend of $3.20 per share in 8 years, and you expect dividends to grow perpetually at 4.2 percent per year thereafter. If the discount rate is 15 percent, how much is the stock currently worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Now suppose Stock A is dividend-paying, with $1 dividend paid for each 3 months. The spot...
Now suppose Stock A is dividend-paying, with $1 dividend paid for each 3 months. The spot price of a Stock A is $5, and the risk-free rate of interest is 8% per annum with continuous compounding. (d) What are the main differences between forwards and futures? (e) What are the forward price and the initial value of a one-year forward contract on one share of Stock A? (f) Four months later, the price of the stock is $6 and the...
Now or Later, Inc. pays an annual dividend to its shareholders. The firm paid a dividend...
Now or Later, Inc. pays an annual dividend to its shareholders. The firm paid a dividend of $0.50 six months ago and the next dividend will be paid 6 months (half a year) from today. Investors expect the next four annual dividend to be $1.00, $2.00, $3.00, and $4.00. After that, investors expect the dividend to grow at 5% per year, forever. What is one share of this stock worth today if the required return is 8%. Round your final...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT