Question

LBD's dividend is expected to grow at 20% for the next five years. After that, g will be 4% forever. R = 10%. The most recent dividend paid was $2. You are a stock analyst.

Using the DDM, what do you estimate LBD's stock price should be
today? **Please show every step and how you did
it**

Answer #1

Price = D1 / ( 1 + r ) + D2 / ( 1 + r )^{2} + D3 / ( 1 +
r )^{3} + D4 / ( 1 + r )^{4} + D5 / ( 1 + r
)^{5} + D6 / [ ( r - g ) * ( 1 + r )^{5} ]

= [ D0 * ( 1 + g ) / ( 1
+ r ) ] + [ D0 * ( 1 + g )^{2} / ( 1 + r )^{2} ] +
[ D0 * ( 1 + g )^{3} / ( 1 + r )^{3} ] + [ D0 * ( 1
+ g )^{4} / ( 1 + r )^{4} ] + [ D0 * ( 1 + g
)^{5} / ( 1 + r )^{5} ] + [ D5 * ( 1 + g2 )/ ( r -
g2 ) * ( 1 + r )^{5} ]

= [ 2 * ( 1 + 0.20 )
/ ( 1 + 0.10 ) ] + [ 2 * ( 1 + 0.20 )^{2} / ( 1 + 0.10
)^{2} ] + [ 2 * ( 1 + 0.20 )^{3} / ( 1 + 0.10
)^{3} ] + [ 2 * ( 1 + 0.20 )^{4} / ( 1 + 0.10
)^{4} ] + [ 2 * ( 1 + 0.20 )^{5} / ( 1 + 0.10
)^{5} ] + [ 2 * ( 1 + 0.20 )^{5} * ( 1 + 0.04 ) / (
0.10 - 0.04 ) * ( 1 + 0.10 )^{5} ]

= 2.1818 + 2.3802 + 2.5965 + 2.8326 + 3.0901 + 53.5618

= **$ 66.64
Answer**

A company’s dividend is expected to grow at 20% for the next six
years. After that, the growth is expected to be 3% forever. If the
required return is 10%, what is the value of the stock at time 6?
The dividend just paid was $1.
A company’s dividend is expected to grow at 20% for the next six
years. After that, the growth is expected to be 3% forever. If the
required return is 10%, what is the value...

fast grow corporation is expecting dividends to grow at 20% rate
for the next two years. the corporation just paid a $2 dividend and
the next dividend will be paid one year from now. after two years
of rapid growth, dividends are expected to grow at a constant rate
9%forever. if the required return is 14%, what is the value of fast
grow corporation common stock today?

A firm’s most recent dividend was $2.00. The firm is expected to
grow at 12% for the next 5 years, and then grow forever at 8%. The
required rate of return on equity (i.e. the discount rate) is 14%.
Find today’s stock price.

Jambo Company just paid a dividend of $2.00 and is expected to
increase the dividend next year to $3.5, to $5 after that. Dividend
is expected to be $7.5 three years from now increasing to $8 a year
after that and threafter, it is expected to grow at industry
average rate of 5% forever. If the cost of equity for Jambo is 10%,
what is its expected stock price today?
A) $203
B) $165 (it says this one is wrong)...

A stock just paid an annual dividend of $1.3. The dividend is
expected to grow by 9% per year for the next 4 years. The growth
rate of dividends will then fall steadily from 9% after 4 years to
3% in year 8.
The required rate of return is 12%.
What is the stock price if the dividend growth rate will stay 3%
forever after 8 years?

A stock does not currently pay a dividend.
It is expected to pay a dividend of $2.00 five years from today.
This dividend is then expected to grow at a rate of 8% for the
following 5 years. It will then level off and grow at a rate of 5%
indefinitely. For the next 5 years, R = 10%. R = 8% for the
following 4 years and then R = 6% indefinitely. What is the
expected stock price today?

Carnes Cosmetics Co.'s stock price is $63.39, and it recently
paid a $2.50 dividend. This dividend is expected to grow by 20% for
the next 3 years, then grow forever at a constant rate, g; and rs =
13%. At what constant rate is the stock expected to grow after Year
3? Round your answer to two decimal places. Please do not round
until the end! If a calculator is used, please tell me the
process.

Blossom Inc., is expected to grow at a rate of 18.000 percent
for the next five years and then settle to a constant growth rate
of 9.000 percent. The company recently paid a dividend of $2.35.
The required rate of return is 14.000 percent.
Present value of dividends is $13.05
Value of stock is $117.20
What is the value of the stock today?

Today is T=0. A company paid a dividend of $2.40 yesterday.
Dividends are expected to grow at a rate of 10% for three years, 8%
for one year and then at a rate of 6%, forever. The required return
is 13% and is never expected to change. Estimate the equilibrium
price of a share of stock at T=0.

Magnetic Corporation expects dividends to grow at a rate of
14.7% for the next two years. After two years dividends are
expected to grow at a constant rate of 3.8%, indefinitely.
Magnetic’s required rate of return is 14.6% and they paid a $1.43
dividend today. What is the value of Magnetic Corporation’s common
stock per share? (Show your answers to the nearest cent)
Dividend at end of year 1:
Dividend at end of year 2:
Dividend at end of year...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 29 minutes ago

asked 29 minutes ago

asked 48 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago