Question

Moody Farms just paid a dividend of $4.00 on its stock. The growth rate in dividends...

Moody Farms just paid a dividend of $4.00 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?

Homework Answers

Answer #1

P0 = [{D0 x (1 + g)} / (1 + r1)] + [{D0 x (1 + g)2} / (1 + r1)2] + [{D0 x (1 + g)3} / (1 + r1)3] +

[{D0 x (1 + g)4} / {(1 + r1)3(1 + r2)}] + [{D0 x (1 + g)5} / {(1 + r1)3(1 + r2)2] +

[{D0 x (1 + g)6} / {(1 + r1)3(1 + r2)3] + [{D0 x (1 + g)7} / {(rC - g)(1 + r1)3(1 + r2)3]

= [($4 x 1.06) / 1.15] + [($4 x 1.062) / 1.152] + [($4 x 1.063) / 1.153] + [($4 x 1.064) / (1.153 x 1.13)]

+ [($4 x 1.065) / (1.153 x 1.132)] + [($4 x 1.066) / (1.153 x 1.133)] +

[($4 x 1.067) / {(0.11 - 0.06)(1.153 x 1.133)}]

= $3.69 + $3.40 + $3.13 + $2.94 + $2.76 + $2.59 + $54.82 = $73.31

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
Talcville Farms just paid a dividend of $3.46 on its stock. The growth rate in dividends...
Talcville Farms just paid a dividend of $3.46 on its stock. The growth rate in dividends is expected to be a constant 6.3% per year indefinitely. Investors require a 16.3% return on the stock for the first three years, a 14.3% return for the next three years, and an 12.3% return thereafter. What is the current share price? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current share price...
Talcville Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends...
Talcville Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 5.5% per year indefinitely. Investors require a 15.5% return on the stock for the first three years, a 13.5% return for the next three years, and an 11.5% return thereafter. What is the current share price? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
Bretton, Inc., just paid a dividend of $3.00 on its stock. The growth rate in dividends...
Bretton, Inc., just paid a dividend of $3.00 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year, indefinitely. Investors require a return of 11 percent on the stock for the first three years, a rate of return of 9 percent for the next three years, and then a return of 7 percent thereafter. What is the current share price for the stock? (Do not round intermediate calculations and round your answer...
Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth...
Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth rate in dividends is expected to be a constant 5.5 percent per year indefinitely. Investors require a return of 18 percent on the stock for the first three years, then a return of 13 percent for the next three years, and then a return of 11 percent thereafter. What is the current share price? (Do not round intermediate calculations. Round your answer to 2...
Sea Side, Inc., just paid a dividend of $2.24 per share on its stock. The growth...
Sea Side, Inc., just paid a dividend of $2.24 per share on its stock. The growth rate in dividends is expected to be a constant 6.3 percent per year indefinitely. Investors require a return of 20 percent on the stock for the first three years, then a return of 15 percent for the next three years, and then a return of 13 percent thereafter. What is the current share price? (Do not round intermediate calculations. Round your answer to 2...
Sea Side, Inc., just paid a dividend of $2.24 per share on its stock. The growth...
Sea Side, Inc., just paid a dividend of $2.24 per share on its stock. The growth rate in dividends is expected to be a constant 6.3 percent per year indefinitely. Investors require a return of 20 percent on the stock for the first three years, then a return of 15 percent for the next three years, and then a return of 13 percent thereafter. What is the current share price? (Do not round intermediate calculations. Round your answer to 2...
Sea Side, Inc., just paid a dividend of $2.32 per share on its stock. The growth...
Sea Side, Inc., just paid a dividend of $2.32 per share on its stock. The growth rate in dividends is expected to be a constant 5.9 percent per year indefinitely. Investors require a return of 22 percent on the stock for the first three years, then a return of 17 percent for the next three years, and then a return of 15 percent thereafter. What is the current share price? (Do not round intermediate calculations. Round your answer to 2...
farmer’s market inc. just paid an annual dividend of $5 on its stock. the growth rate...
farmer’s market inc. just paid an annual dividend of $5 on its stock. the growth rate in ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Farmer’s Market Inc. just paid an annual dividend of $5 on its stock. The growth rate in divide... Farmer’s Market Inc. just paid an annual dividend of $5 on its stock. The growth rate in dividends is expected to be a constant 5% per...
Madison Tour, Inc., just paid a dividend of $3.15 per share on its stock. The dividends...
Madison Tour, Inc., just paid a dividend of $3.15 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Assume investors require a return of 11 percent on this stock. What will the price be in 3 years?
1. Sky High Co. just paid a dividend of $2.0 per share on its stock. The...
1. Sky High Co. just paid a dividend of $2.0 per share on its stock. The dividends are expected to grow at a constant rate of 2 percent per year indefinitely. If investors require an 8.6 percent return on Sky High Co. stock, the current price is $ _________ . Round it to two decimal places 2. Sky High Co. just paid a dividend of $4.6 per share on its stock (D0). The dividends are expected to grow at a...