Question

Campbell Supper Co. paid a $0.772 dividend per share in 2013, which grew to $0.97 in...

Campbell Supper Co. paid a $0.772 dividend per share in 2013, which grew to $0.97 in 2016. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 9.4 percent?

Homework Answers

Answer #1

Dividend in 2013 = $0.772
Dividend in 2016 = $0.97

Dividend in 2013 * (1 + Growth Rate)^3 = Dividend in 2016
$0.772 * (1 + Growth Rate)^3 = $0.97
(1 + Growth Rate)^3 = 1.25648
1 + Growth Rate = 1.0791
Growth Rate = 0.0791 or 7.91%

Dividend in 2017 = Dividend in 2016 * (1 + Growth Rate)
Dividend in 2017 = $0.97 * 1.0791
Dividend in 2017 = $1.0467

Price at the beginning of 2017 = Dividend in 2017 / (Required Return - Growth Rate)
Price at the beginning of 2017 = $1.0467 / (0.0940 - 0.0791)
Price at the beginning of 2017 = $1.0467 / 0.0149
Price at the beginning of 2017 = $70.25

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Campbell Supper Co. paid a $0.682 dividend per share in 2013, which grew to $0.83 in...
Campbell Supper Co. paid a $0.682 dividend per share in 2013, which grew to $0.83 in 2016. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 8.5 percent?
Waller Co. paid a $0.152 dividend per share in 2000, which grew to $0.330 in 2012....
Waller Co. paid a $0.152 dividend per share in 2000, which grew to $0.330 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 15.2 percent? (Round the growth rate, g, to 4 decimal places. Round your final answer to 2 decimal places.)
Waller Co. paid a $0.141 dividend per share in 2000, which grew to $0.297 in 2012....
Waller Co. paid a $0.141 dividend per share in 2000, which grew to $0.297 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 14.1 percent? (Round the growth rate, g, to 4 decimal places. Round your final answer to 2 decimal places.)
Storico Co. just paid a dividend of $2.45 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $2.45 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on Storico stock is 11 percent, what will a share of stock sell for today?
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today?
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (Please show how to...
Storico Co. just paid a dividend of $2.00 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $2.00 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company's stock is 17 percent, what will a share of stock sell for today? (Do not round intermediate...
Storico Co. just paid a dividend of $1.85 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $1.85 per share. The company will increase its dividend by 24 percent next year and will then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company's stock is 14 percent, what will a share of stock sell for today? (Do not round...
Warf Co. just paid a dividend of $4.00 per share. The company will increase its dividend...
Warf Co. just paid a dividend of $4.00 per share. The company will increase its dividend by 20 percent next year and will then reduce the dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent, after which the company will keep that 5 percent constant growth rate, forever. If the required return on Warf stock is 13 percent, what will a share of stock sell for today? In a DCF analysis,...
Storico Co. just paid a dividend of $1.50 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $1.50 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company's stock is 15 percent, what will a share of stock sell for today? (Do not round intermediate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT