Question

Indigo River Shipping stock has an expected return of 9.68 percent and pays annual dividends that are expected to grow annually by 2.5 percent forever. The firm’s next dividend is expected in 1 year from today. If the firm’s dividend is expected to be 18.65 dollars in 5 years from today, then what is the current price of the stock?

Answer #1

Expected return (Ke) = | 9.68% or | 0.0968 | |||||

Growth rate (g) = | 2.5% or | 0.025 | |||||

Next dividend in 5 Years (D5) = | 18.65 | ||||||

Price of stock at end of 4th years (P4) = | D5/(ke-g) | ||||||

18.65/(0.0968-0.025) | |||||||

259.7493 | |||||||

Price of stock at end of 4th years is $259.7493. | |||||||

Price of stock day = P4/(1+ke)^n | |||||||

259.7493 | /(1+0.0968)^4 | ||||||

$ 179.49 | |||||||

So,
Current price of stock is $179.49. |

What is the current share price of Indigo River Consulting stock
if it is expected to pay a dividend of 4.92 dollars every quarter
forever, the stock’s expected return is 8.16 percent per year, and
the next dividend is expected in 3 months? What is the expected
dividend for Indigo River Consulting expected to be in 3 months if
the stock is expected to pay a constant dividend every quarter
forever, the expected return is 17.24 percent per year, the...

A stock has an expected annual return of 8.7 percent and is
expected to pay annual dividends forever. The first annual dividend
is expected in 1 year and all subsequent annual dividends are
expected to grow at a constant rate of 3.81 percent per year. The
dividend expected in 1 year from today is expected to be 20.67
dollars. What is the present value (as of today) of the dividend
that is expected to be paid in 3 years from...

What is the price of Yellow Sand Shipping stock expected to be
in 5 years if its annual dividend is expected to grow by 4.31
percent per year forever, the next dividend is expected in 1 year,
the dividend is expected to be 5.26 dollars in 5 years, and the
expected return is 11.87 percent per year?

1. An investor requires a return of 12 percent. A stock sells
for $18, it pays a dividend of $1, and the dividends compound
annually at 6 percent. What should the price of the stock be?
2. You are considering a stock A that pays a dividend of $1.
The beta coefficient of A is 1.3. The risk free return is 6%, while
the market average return is 13%.
a. What is the required return for Stock A?
b. If...

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?

A company pays dividends annually on Dec. 31. Yesterday's
dividend was $1. Dividends are expected to grow for the next 2
years at 10% and then settle down to a longrun growth rate of 5% in
perpetuity. Because of the initial riskiness of the company,
investors required a 20% rate of return over the first 2 years, but
only a 12% rate of return thereafter. What is the fair price for
the stock today, January 1?

Schultz Inc. is expected to pay equal
dividends at the end of each of the next three years. Thereafter,
the dividend will grow at a constant annual rate of 5%, forever.
The current stock price is $25. What is next year’s dividend
payment if the required rate of return is 6 percent? (10
points)

Oxygen Optimization stock has an expected annual return of 11.33
percent. The stock is expected to be priced at 77.87 dollars per
share in 1 year and the stock currently has an expected dividend
yield of 5.39 percent. What is the current price of the stock?

The next three annual dividends paid by Oxygen Optimization
stock are expected to be 6.94 dollars in one year, 3.58 dollars in
two years, and 6.11 dollars in three years. The price of the stock
is expected to be 88.08 dollars in two years. The expected annual
return for the stock is 9.66 percent. What is the current price of
one share of Oxygen Optimization stock?

An investment, which has an expected return of 10.65 percent, is
expected to make annual cash flows forever. The first annual cash
flow is expected in 1 year and all subsequent annual cash flows are
expected to grow at a constant rate of 5.63 percent per year. The
cash flow in 1 year from today is expected to be 19,250 dollars.
What is the present value (as of today) of the cash flow that is
expected to be made in...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 21 minutes ago

asked 27 minutes ago

asked 35 minutes ago

asked 39 minutes ago

asked 40 minutes ago

asked 58 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago