Question

A stock just paid a dividend of $1.20 The required rate of return is 10.1% and...

A stock just paid a dividend of $1.20 The required rate of return is 10.1% and the constant growth rate is 4.0% What is the current stock price?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Current Price of the stock

Here, we have Dividend per share in year 0 (D0) = $1.20 per share

Dividend Growth Rate (g) = 4.00% per year

Required Rate of Return (Ke) = 10.10%   

As per Constant Growth Dividend Valuation Model, the Value of the stock is calculated as follows

Current Value of the stock = D0(1 + g) / (Ke – g)

= $1.20(1 + 0.04) / 0.1010 – 0.04)

= $1.2480 / 0.0610

= $20.46 per share

“Therefore, the Current Price of the stock will be $20.46 per share”

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
If the stock just paid a dividend of $5 (D0 = $5), and has a required...
If the stock just paid a dividend of $5 (D0 = $5), and has a required rate of return (ks) of 15%, and a current price of $70, find the estimated constant growth rate using the Gordon constant growth rate model.
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...
Given a current dividend of $4.00 (just paid), a required rate of return of 8% and...
Given a current dividend of $4.00 (just paid), a required rate of return of 8% and a dividend growth rate (g) of 2% for 10 years, compute the current value of the stock.
Hubbard Industries just paid a common dividend, D0, of $1.20. It expects to grow at a...
Hubbard Industries just paid a common dividend, D0, of $1.20. It expects to grow at a constant rate of 2% per year. If investors require a 12% return on equity, what is the current price of Hubbard's common stock? Carlysle Corporation has perpetual preferred stock outstanding that pays a constant annual dividend of $1.30 at the end of each year. If investors require an 6% return on the preferred stock, what is the price of the firm's perpetual preferred stock?...
just paid a dividend of D0 = $1.20. Analysts expect the company's dividend to grow by...
just paid a dividend of D0 = $1.20. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 8.00%. What is the best estimate of the stock's current market value?
1. A stock just paid a dividend of $4.73 and is expected to maintain a constant...
1. A stock just paid a dividend of $4.73 and is expected to maintain a constant dividend growth rate of 4.6 percent indefinitely. If the current stock price is $84, what is the required return on the stock? 2. Gnomes R Us just paid a dividend of $1.95 per share. The company has a dividend payout ratio of 55 percent. If the PE ratio is 17.4 times, what is the stock price?
Thirsty Cactus Corp. just paid a dividend of $1.20 per share. The dividends are expected to...
Thirsty Cactus Corp. just paid a dividend of $1.20 per share. The dividends are expected to grow at 25 percent for the next 9 years and then level off to a 6 percent growth rate indefinitely. Required : If the required return is 14 percent, what is the price of the stock today?
farmer’s market inc. just paid an annual dividend of $5 on its stock. the growth rate...
farmer’s market inc. just paid an annual dividend of $5 on its stock. the growth rate in ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Farmer’s Market Inc. just paid an annual dividend of $5 on its stock. The growth rate in divide... Farmer’s Market Inc. just paid an annual dividend of $5 on its stock. The growth rate in dividends is expected to be a constant 5% per...
The current dividend yield on Chrysler’s common stock is 2.8 percent. The company just paid a...
The current dividend yield on Chrysler’s common stock is 2.8 percent. The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?
Antonius and Cleo, LLC just paid an annual dividend of $1.26 last month. The required return...
Antonius and Cleo, LLC just paid an annual dividend of $1.26 last month. The required return is 14.6 percent and the growth rate is 3.1 percent. What is the expected value of this stock 11 years from now? Cerberus Undertakers, Inc. just paid an annual dividend of $1.34 and is expected to pay annual dividends of $1.96 and $2.56 per share the next two years, respectively. After that, the firm expects to maintain a constant dividend growth rate of 5.7...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT