Question

A stock has a required return of 13% and a dividend yield of 2%. The price...

A stock has a required return of 13% and a dividend yield of 2%. The price of the stock is $58 and the stock is currently in a constant dividend growth phase.  What will be the stock’s price be in 5 years?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The stock price is computed as shown below:

The dividend is computed as follows:

= Dividend yield x price of the stock

= 2% x $ 58

= $ 1.16

The growth rate is computed as shown below:

= required return - Dividend / price of stock

= 0.13 - $ 1.16 / $ 58

= 11% or 0.11

So, the price of the stock is computed as follows:

= Current price x (1 + growth rate)5

= $ 58 x (1 + 0.11)5

= $ 97.73 Approximately

Feel free to ask in case of any query relating to this question

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
A stock has a required return of 14%, a constant growth rate of 10%, and a...
A stock has a required return of 14%, a constant growth rate of 10%, and a dividend payout rate of 55%. The stock’s price-earnings multiple (P/E) is most likely to be : 1. 11 x 2. 13 X 3. 15 x 4. 14 x 5. 12 x
A firm's stock has a required return of 10.00%. The stock's dividend yield (using the dividend...
A firm's stock has a required return of 10.00%. The stock's dividend yield (using the dividend to be paid in one year from today) is 5.50%. What is the amount of the dividend just received if the current stock price is $36 and the dividends grow annually at a constant rate?
The last dividend of a company is $2.25. The required rate of return is 10.75% and...
The last dividend of a company is $2.25. The required rate of return is 10.75% and expected constant growth rate is 3.50%. What is the expected stock price, dividend, capital gains yield and dividend yield for the next three years? If you know a company's required rate of return is 11.50% and its expected constant growth rate is 4.50%, what is the expected dividend yield?
Mastercard Inc.’s stock has a required return of 13% and the stock is currently priced at...
Mastercard Inc.’s stock has a required return of 13% and the stock is currently priced at $50 per share. Mastercard just paid a dividend of $1.00, and they have announced that they plan to increase its dividend payment at a rate of 30% per year for the next 4 years. After Year 4, they expect the dividend growth rate to slow down from the 30% to a more modest constant growth rate of X% per year going forward forever. What...
(7-2) Constant Growth Valuation Boehm Incorporated is expected to pay a $1.50 per share dividend at...
(7-2) Constant Growth Valuation Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1=$1.50D1=$1.50). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rsrs, is 13%. What is the estimated value per share of Boehm’s stock? (7-4) Preferred Stock Valuation Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each...
(7-2) Constant Growth Valuation Boehm Incorporated is expected to pay a $1.50 per share dividend at...
(7-2) Constant Growth Valuation Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1=$1.50D1=$1.50). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rsrs, is 13%. What is the estimated value per share of Boehm’s stock? (7-4) Preferred Stock Valuation Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each...
1) A stock just paid a dividend of $0.50. If the dividend is expected to grow...
1) A stock just paid a dividend of $0.50. If the dividend is expected to grow 3% per year, what will the price be if the required return is 9%? 2) A stock is expected to pay a dividend of $1 at the end of the year. The required rate of return is 11%, and the expected growth rate is 5%. What is the current stock price? 3) A stock just paid a dividend of $1. The required rate of...
Using the following information to evaluate a stock price. A stock just paid its dividend of...
Using the following information to evaluate a stock price. A stock just paid its dividend of $2.00 and its required return is 13%. If the growth rate g = 0%, in other words, the dividend is constant at $2.00, what is the stock price? 837 What if g is constant and is 6%? 33.3333 What is the dividend yield and what is the capital gains yield for b? Assume g is non-constant, the growth rate is 30% for Year 0...
Buchi Manufacturing currently has a stock price of $59; its required return is 10%, and dividend...
Buchi Manufacturing currently has a stock price of $59; its required return is 10%, and dividend yield 5.5%. What is the expected dividend to be paid next year? Group of answer choices $3.25 $4.62 $3.11 $4.80 $2.09
10) Stay-Home's stock has the required return of 10% and beta of 1.2. Given that the...
10) Stay-Home's stock has the required return of 10% and beta of 1.2. Given that the market return is 9%, using the CAPM, what is the risk-free rate? -Mama Mia Inc. just paid $5 dividends per share; it was $3.25 seven years ago. Assuming a constant growth rate and 10% required return. 13) How much is their dividend growth rate? 14) What is the current stock price of Mama Mia?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT