Question

8) Procter and Gamble​ (PG) paid an annual dividend of $1.66 in 2009. You expect PG...

8) Procter and Gamble​ (PG) paid an annual dividend of $1.66 in 2009. You expect PG to increase its dividends by 7.7% per year for the next five years​ (through 2014), and thereafter by 3.1% per year. If the appropriate equity cost of capital for Procter and Gamble is 7.8% per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2009.

The price per share is $? (Round to the nearest cent)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Year 1 dividend = 1.66 * 1.077 = 1.78782

Year 2 dividend = 1.78782 * 1.077 = 1.92548

Year 3 dividend = 1.92548 * 1.077 = 2.07374

Year 4 dividend = 2.07374 * 1.077 = 2.23342

Year 5 dividend = 2.23342 * 1.077 = 2.4054

Year 6 dividend = 2.4054 * 1.031 = 2.47996

Value at year 5 = D6 / required rate - growth rate

Value at year 5 = 2.47996 / 0.078 - 0.031

Value at year 5 = 2.47996 / 0.047

Value at year 5 = 52.76511

Price per share = 1.78782 / (1 + 0.078)1 + 1.92548 / (1 + 0.078)2 + 2.07374 / (1 + 0.078)3 + 2.23342 / (1 + 0.078)4 + 2.4054 / (1 + 0.078)5 + 52.76511 / (1 + 0.078)5

Price per share = $44.52

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
Procter and Gamble​ (PG) paid an annual dividend of $ 1.76 in 2009. You expect PG...
Procter and Gamble​ (PG) paid an annual dividend of $ 1.76 in 2009. You expect PG to increase its dividends by 7.7 % per year for the next five years​ (through 2014), and thereafter by 2.9 % per year. If the appropriate equity cost of capital for Procter and Gamble is 7.5 % per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2009.
Procter and Gamble​ (PG) paid an annual dividend of $ 1.73 in 2009. You expect PG...
Procter and Gamble​ (PG) paid an annual dividend of $ 1.73 in 2009. You expect PG to increase its dividends by 8.8 % per year for the next five years​ (through 2014), and thereafter by 3.4 % per year. If the appropriate equity cost of capital for Procter and Gamble is 8.5 % per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2009. The Price per share is $
Procter and Gamble​ (PG) paid an annual dividend of $ 1.71 in 2009. You expect PG...
Procter and Gamble​ (PG) paid an annual dividend of $ 1.71 in 2009. You expect PG to increase its dividends by 7.5 % per year for the next five years​ (through 2014), and thereafter by 2.6 % per year. If the appropriate equity cost of capital for Procter and Gamble is 7.2 % per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2009.
Procter and Gamble​ (PG) paid an annual dividend of $2.96 in 2018. You expect PG to...
Procter and Gamble​ (PG) paid an annual dividend of $2.96 in 2018. You expect PG to increase its dividends by 7.3% per year for the next five years​ (through 2023), and thereafter by 2.8% per year. If the appropriate equity cost of capital for Procter and Gamble is 7.7% per​ year, use the​ dividend-discount model to estimate its value per share at the end of 2018.
Proctor and Gamble paid an annual dividend of $2.89 in 2018. You expect PG to increase...
Proctor and Gamble paid an annual dividend of $2.89 in 2018. You expect PG to increase its dividends by 7.9% per year for the next five years through 2023. and thereafter by 2.5 % per year. if the appropriate equity cost of capital for P&G is 7.7% per year, use the dividend discount model to estimate its value per share at the end of 2018.
Proctor and Gamble paid an annual dividend of $2.87 in 2018. You expect PG to increase...
Proctor and Gamble paid an annual dividend of $2.87 in 2018. You expect PG to increase its dividend by 7.8% per year for the next five years (through 2023), and thereafter by 2.6% per year. if the appropriate equity cost of capital for proctor and gamble is 8.7% per year, use the dividend-discount model to estimate its value per share at the end of 2018.
Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect...
Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 11.9% per year thereafter until the 66th year.​ Thereafter, growth will level off at 2.2% per year. According to the​ dividend-discount model, what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 8.9%​? The value of​ Gillette's stock is ​$ ​(Round to the nearest​ cent.)
Assume Gillette Corporation will pay an annual dividend of $0.65 one year from now. Analysts expect...
Assume Gillette Corporation will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12.1% per year thereafter until the 6th year.​ Thereafter, growth will level off at 2.3% per year. According to the​ dividend-discount model, what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 7.5%​? The value of​ Gillette's stock is __________ ​(Round to the nearest​ cent.)
Chapter 6 13. Consider the following bonds: Bond Coupon Rate (annual payments) Maturity (years) A 0%...
Chapter 6 13. Consider the following bonds: Bond Coupon Rate (annual payments) Maturity (years) A 0% 15 B 0% 10 C 4% 15 D 8% 10 What is the percentage change in the price of each bond if its yield to maturity falls from 6% to 5%? Which of the bonds A–D is most sensitive to a 1% drop in interest rates from 6% to 5% and why? Which bond is least sensitive? Provide an intuitive explanation for your answer....
Assume Gillette Corporation will pay an annual dividend of $ 0.65 one year from now. Analysts...
Assume Gillette Corporation will pay an annual dividend of $ 0.65 one year from now. Analysts expect this dividend to grow at 12.4% per year thereafter until the 4th year.?Thereafter, growth will level off at 2.2% per year. According to the? dividend-discount model, what is the value of a share of Gillette stock if the? firm's equity cost of capital is 7.8%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT