Question

5) Assume that a company issued as stock that offers $2 dividends today. If dividends are...

5) Assume that a company issued as stock that offers $2 dividends today. If dividends are growing at 5% per year, and the expected rate of return is 7%, how much the stock price will be selling today? 5 years from now ?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Div1 = $2 * (1 + 5%) = $2.10

Div6 = Div0 * (1 + g)6

Div6 = $2 * (1 + 5%)6

Div6 = $2.68

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
Assume a stock currently pays no dividends today, but expected to begin paying dividends $7 per...
Assume a stock currently pays no dividends today, but expected to begin paying dividends $7 per share in 6 years. The dividends are expected to have a constant growth rate of 6% at that time and firm has a cost of equity of 10.4%. Using the dividend discount model, what do you estimate the share price should be?
Manny Delgado’s company is now listed on the Nasdaq. The stock has a current price of...
Manny Delgado’s company is now listed on the Nasdaq. The stock has a current price of $50 per share (assume this is the “true” value). The company just paid a dividend of $3 per share yesterday. The dividends are expected to grow at a permanent growth rate of 4% per year. Calculate the following: (1) the annual required rate of return of this stock, and (2) the expected stock price one year from today.
Q1/Character Co. offers a common stock that pays an annual dividend of $3.36 a share. The...
Q1/Character Co. offers a common stock that pays an annual dividend of $3.36 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 7.82 percent return on your equity investments? Q2/The Onboard Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 23.3 percent a year for the next 3...
ABC Company is experiencing a rapid growth. The first dividend will be paid next year (at...
ABC Company is experiencing a rapid growth. The first dividend will be paid next year (at year . After that, dividends are expected to grow at 20% per year during the next two years (years 2 and 3), and then 5% per year indefinitely. The required rate of return on this stock is 15%, and the stock is currently selling for 50TL. What is the expected dividend for the coming year (Div1)? (5 points) What is the expected price of...
The Yubaba Company has so far not paid a dividend on its stock. Investors believe that...
The Yubaba Company has so far not paid a dividend on its stock. Investors believe that the Company won’t pay a dividend next year, but that it will pay dividends starting two years from now. The dividend then is expected to be $0.20 per share. Three years from now the dividend is expected to be $0.50 per share, and four years from now it’s expected to be $0.75 per share. Thereafter the dividend is expected to grow at a constant...
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...
An analyst has made the following estimate of Company Z’s dividends. After 5 years of growing...
An analyst has made the following estimate of Company Z’s dividends. After 5 years of growing annually at 2% from an initially value of $1.00, company Z is expected to quit growing and pay a constant dividend of $1.5 indefinitely. (10 pts) If the required return is 12%, what should the stock of Company Z sell for today?
XYZ company announced today that it will begin paying annual dividends next year. The first dividend...
XYZ company announced today that it will begin paying annual dividends next year. The first dividend will be $0.12 a share. The following dividends will be $0.15, $0.20, $0.50, and $0.60 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 5 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8 percent?
Problem 7-13 Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is...
Problem 7-13 Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 80% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 6% per year. If...
Assume a stock that is expected to benet from supernormal growth of 8% in dividends per...
Assume a stock that is expected to benet from supernormal growth of 8% in dividends per year over the next six years. Following this period, dividends are expected to grow at a constant rate of 3% per year forever. The stock paid a dividend of 5.50 last year. Dividends are paid to shareholders once a year, the next payment is due one year from today, the second payment two years from today, etc. The required rate of return on the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT