Question

a. ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually. Analysts estimate that dividends per share will grow at a rate of 20% for the next 2 years, at 15% for the subsequent 3 years, and at 3% thereafter. If the shareholders’ required rate of return is 12% per year, then what is the price of the stock today? What will be the ex-dividend price at the end of the first year? What will be the capital gains yield in the first year?

Answer #1

Price of stock is equal to the present value of all future dividends

= 1(1+20%)/(1+12%) + 1(1.2)(1.2)/(1.12)^2 + 1(1.2)^2(1.15)/(1.12)^3 + 1(1.2)^2(1.15)^2/(1.12)^4 + 1(1.2)^2(1.15)^3/(1.12)^5 + 1(1.2)^2(1.15)^3(1.03)/(1.12)^5(12%-3%)

= $20.07 per share

Ex-dividend price after one year =

1(1.2)(1.2)/(1.12)^1 + 1(1.2)^2(1.15)/(1.12)^2 + 1(1.2)^2(1.15)^2/(1.12)^3 + 1(1.2)^2(1.15)^3/(1.12)^4 + 1(1.2)^2(1.15)^3(1.03)/(1.12)^4(12%-3%)

= $21.28 per share

Capital gains yield = (21.28-20.07)/20.07

= 6.03%

A company just paid a dividend of $1.30 per share. The consensus
forecast of financial analysts is a dividend of $1.70 per share
next year and $2.30 per share two years from now. Thereafter, you
expect the dividend to grow 4% per year indefinitely into the
future. If the required rate of return is 11% per year, what would
be a fair price for this stock today? (Answer to the nearest
penny.)

A)
Assume a corporation has just paid a dividend of $ 1.03 per
share. The dividend is expected to grow at a rate of 4.4% per year
forever, and the discount rate is 8.1%.
What is the Capital Gains yield of this stock?
B)
You're analyzing the stock of a certain company. The most recent
dividend paid was $3 dollars per share. The company's discount rate
is 10%, and the firm is expected to grow at 4% per year forever....

Colgate-Palmolive Company has just paid an annual dividend of $
1.88. Analysts are predicting dividends to grow by $ 0.12per year
over the next five years. After then, Colgate's earnings are
expected to grow 5.9 per year, and its dividend payout rate will
remain constant. If Colgate's equity cost of capital is 7.6 % per
year, what price does the dividend-discount model predict Colgate
stock should sell for today?
The price per share is $ ( ) (Round to four...

Library Co. just paid a dividend of $2.75 per share. The
analysts’ consensus is that its dividends will be increased by 4%
next year. Dividends are expected to grow at the rate of 3% per
year, forever, after that. For this problem, assume a market
capitalization rate (k) of 10%.
- Calculate Library’s dividends per share in years 1, 2 and
3.
- Calculate the intrinsic value of a share of Library Co.
today.

Q:R&D Technology Corporation has just paid a dividend of
$0.50 per share . The dividends are expected to grow at 24% per
year for the next two years and at 8% per year thereafter. If the
required rate of return in the stock is 16% (APR), calculate the
current value of the stock. a.

6. Assume a corporation has just paid a dividend of $ 2.96 per
share. The dividend is expected to grow at a rate of 3.4% per year
forever, and the discount rate is 8.2%.
What is the Capital Gains yield of this stock?

19. The company just paid a dividend of $2.60 per share on its
stock. The dividends are expected to grow at a constant rate of 3%
per year forever. The required rate of return for this stock is
15%.What is expected dividend payment at the end of year 4?(Round
answers to two decimals, enter your answers without any characters
such as "$", or "," such as 1234.78)
12.
A corporate bond offers 9% coupon rate, compounded
semi-annually. The maturity left...

The In-Tech Co. just paid a dividend of $1 per share. Analysts
expect its dividend to grow at 25% per year for the next three
years and then at a constant growth rate per year thereafter. The
estimate of the constant growth rate of dividends is based on the
long term return of equity 25% and payout ratio 80%. If the
required rate of return on the stock is 18%, what is the current
value of the stock? Clearly show...

Widget Manufacturers Inc. just paid a $3 per share dividend. It
is expected that dividends will grow at 10.00% per year for the
next 2 years, at 6.00% the third year and 3.00% every year
thereafter. Widget’s’ equity beta is 0.90, while the risk-free rate
is 3.20% per year and the market risk premium is 6.00% per year.
Based on this information, compute the price per share of Widget
stock.
Round your answer to the nearest penny. For example,
$2,371.243...

A7X Corp. just
paid a dividend of $1.50 per share. The dividends are expected to
grow at 40 percent for the next 10 years and then level off to a
growth rate of 6 percent indefinitely.
If the required
return is 15 percent, what is the price of the stock today?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 11 minutes ago

asked 31 minutes ago

asked 33 minutes ago

asked 52 minutes ago

asked 54 minutes ago

asked 54 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago