Question

The next three annual dividends paid by XYZ stock are expected to be $7.43 in one...

The next three annual dividends paid by XYZ stock are expected to be $7.43 in one year, $2.79 in two years, and $3.05 in three years. The price of the stock is expected to be $45.78 in two years. The expected annual return for the stock is 15.20 percent. What is the current price of one share of XYZ stock?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Expected Dividend in year 1(D1) = $7.43

Expected Dividend in year 2(D2) = $2.79

Expected Dividend in year 3(D3) = $3.05

Price in Stock in year 2(P2) = $45.78

Expected annual return for the stock (ke)= 15.20%

calculating the Current price of Stock:-

P0 = $6.450 + $2.102 + $34.496

P0 = $43.05

So, the current price of one share of XYZ stock is $43.05

Note- Dividend in year 3 is included in the price of stock in year 2, thats why it is not taken.

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating       

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
The next three annual dividends paid by Oxygen Optimization stock are expected to be 6.94 dollars...
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?
1. XYZ Inc. has paid annual dividends of $.48, $0.60, and $0.62 a share over the...
1. XYZ Inc. has paid annual dividends of $.48, $0.60, and $0.62 a share over the past three years, respectively. The company plans to maintain a constant dividend in the future. If the required rate of return is 14% for such stock with no growth potential, how much is the price per share you are willing to pay? Answer: _____ ( round to 2 decimal places) 2. ABC pays a constant dividend of $0.75 a share. The company announced today...
If 1) the expected return for XYZ stock is 9.5 percent; 2) the dividend is expected...
If 1) the expected return for XYZ stock is 9.5 percent; 2) the dividend is expected to be $4.38 in one year, $6.33 in two years, $0 in three years, and $2.54 in four years; and 3) after the dividend is paid in four years, the dividend is expected to begin growing by 4.5 percent a year forever, then what is the current price of one share of the stock?
If 1) the expected return for XYZ stock is 9.5 percent; 2) the dividend is expected...
If 1) the expected return for XYZ stock is 9.5 percent; 2) the dividend is expected to be $4.38 in one year, $4.62 in two years, $0 in three years, and $2.54 in four years; and 3) after the dividend is paid in four years, the dividend is expected to begin growing by 4.5 percent a year forever, then what is the current price of one share of the stock?
XYZ has one share of stock and one bond. The total value of the two securities...
XYZ has one share of stock and one bond. The total value of the two securities is $1,100. The bond has a YTM of 16.20 percent, a coupon rate of 9.60 percent, and a face value of $1,000; pays semi-annual coupons with the next one expected in 6 months, and matures in 3 years. The stock pays annual dividends that are expected to be $12.40 and paid in one year. What is the expected return for the stock? a) 9.83%...
XYZ has ine share of stock and one bond. The total value of the teosecurities is...
XYZ has ine share of stock and one bond. The total value of the teosecurities is $1,100. The bond has a YTM of 12.60 percent,a coupon rate of 9.60 percent, and a face value of $1000; pays semi-annual coupons with the next one expected in 6 months; and matures in 3 years. The stock pays annual dividends that are expected to grow by 4.82 percent per year forever. The next dividend is expected to be $13.40 and paid in one...
The common stock of NCP paid ​$1.50 in dividends last year. Dividends are expected to grow...
The common stock of NCP paid ​$1.50 in dividends last year. Dividends are expected to grow at an annual rate of 9.30 percent for an indefinite number of years. a. If​ NCP's current market price is ​$25.87 per​ share, what is the​ stock's expected rate of​ return? b. If your required rate of return is 11.3 ​percent, what is the value of the stock for​ you? c. Should you make the​ investment? a. If​ NCP's current market price is ​$25.87per​...
The growth in dividends of XYZ Inc. is expected to be 12% per year for the...
The growth in dividends of XYZ Inc. is expected to be 12% per year for the next two years, followed by a growth rate of 8% per year for three years; after this five-year period, the growth in dividends is expected to be 4% per year, indefinitely. The required rate of return on XYZ Inc. is 12%. Last year's dividends per share were $5.50. The price of the stock today should be closest to
Moody Farms just paid a dividend of $4.00 on its stock. The growth rate in dividends...
Moody Farms just paid a dividend of $4.00 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?
​(Common stock valuation​) The common stock of NCP paid ​$ 1.45 in dividends last year. Dividends...
​(Common stock valuation​) The common stock of NCP paid ​$ 1.45 in dividends last year. Dividends are expected to grow at an annual rate of 5.50 percent for an indefinite number of years. a. If​ NCP's current market price is ​$ 27.23 per​ share, what is the​ stock's expected rate of​ return? b. If your required rate of return is 7.5 ​percent, what is the value of the stock for​ you? c. Should you make the​ investment? ​(Round to two...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT