Question

Consider the following three stocks: Stock A is expected to provide a dividend of $11.10 a...

Consider the following three stocks: Stock A is expected to provide a dividend of $11.10 a share forever. Stock B is expected to pay a dividend of $6.10 next year. Thereafter, dividend growth is expected to be 5.00% a year forever. Stock C is expected to pay a dividend of $4.90 next year. Thereafter, dividend growth is expected to be 21.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

a-1. If the market capitalization rate for each stock is 11.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a-2. Which stock is the most valuable? Stock C Stock A Stock B

b-1. If the market capitalization rate for each stock is 8.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
Consider the following three stocks: Stock A is expected to provide a dividend of $11.40 a...
Consider the following three stocks: Stock A is expected to provide a dividend of $11.40 a share forever. Stock B is expected to pay a dividend of $6.40 next year. Thereafter, dividend growth is expected to be 2.00% a year forever. Stock C is expected to pay a dividend of $4.60 next year. Thereafter, dividend growth is expected to be 18.00% a year for five years (i.e., years 2 through 6) and zero thereafter. a-1. If the market capitalization rate...
Here are forecasts for next year for two stocks: Stock A Stock B Return on equity...
Here are forecasts for next year for two stocks: Stock A Stock B Return on equity 15 % 14 % Earnings per share $ 2.00 $ 1.50 Dividends per share $ 1.00 $ 1.00 a. What are the dividend payout ratios for each firm? (Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number.) b. What are the expected dividend growth rates for each stock? Assume dividend has a steady growth for both...
Here are forecasts for next year for two stocks: Stock A Stock B Return on equity...
Here are forecasts for next year for two stocks: Stock A Stock B Return on equity 12 % 10 % Earnings per share $ 4.00 $ 3.50 Dividends per share $ 3.00 $ 3.00 a. What are the dividend payout ratios for each firm? (Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number.) payout ratio % Stock A Stock B b. What are the expected dividend growth rates for each stock? Assume...
Consider four different stocks, all of which have a required return of 16 percent and a...
Consider four different stocks, all of which have a required return of 16 percent and a most recent dividend of $2.80 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 8 percent, 0 percent, and −5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 12 percent growth rate,...
Consider four different stocks, all of which have a required return of 18.25 percent and a...
Consider four different stocks, all of which have a required return of 18.25 percent and a most recent dividend of $3.60 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and –5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20.25 percent for the next two years and then maintain a constant 12 percent growth rate,...
a. Computer stocks currently provide an expected rate of return of 18%. MBI, a large computer...
a. Computer stocks currently provide an expected rate of return of 18%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MBI dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Growth rate % b-1. If dividend growth forecasts for MBI are revised downward to 2% per year, what will be...
The expected pretax return on three stocks is divided between dividends and capital gains in the...
The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0 a. If each stock is priced at $175, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 45% (the effective tax rate on dividends received by corporations is 10.5%), and...
(Stocks) A stock with a beta of 1.36 is expected to pay a $1.57 dividend over...
(Stocks) A stock with a beta of 1.36 is expected to pay a $1.57 dividend over the next year. The dividends are expected to grow at 2.33% per year forever. What is the stock's value per share (to the nearest cent, no $ symbol) if the risk-free rate is 0.21% and the market risk premium (i.e., the difference between the market return and the risk-free rate) is 7.79%? Note: You first need to find the required rate of return (r)...
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next...
Newkirk, Inc., is expected to pay equal dividends at the end of each of the next two years. Thereafter, the dividend will grow at a constant annual rate of 4.1 percent, forever. The current stock price is $46. What is next year’s dividend payment if the required rate of return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) dividend payment=
Problem 18-20 The Duo Growth Company just paid a dividend of $1.00 per share. The dividend...
Problem 18-20 The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 23% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 18% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Use intermediate calculations rounded to 4 decimal places. Round your answer to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT