Question

You have found a stock that just paid a dividend of $1.87 and your have a...

You have found a stock that just paid a dividend of $1.87 and your have a required return of 11.1%. The short-term growth rate for this stock's dividends is found to be 8.3% and the long-term growth rate is estimated to be 2.46%. You think that it may take 18 years for the dividend growth rate to gradually decline to this level, but you want to calculate the firms intrinsic value with these assumptions. What is the estimated intrinsic value for this firm? State your answer as a dollar amount with two 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
A company just paid an annual dividend of $5.00 per share on its common stock. Due...
A company just paid an annual dividend of $5.00 per share on its common stock. Due to the success of a new product, the firm expects to achieve a dramatic increase in its short-term growth rate in sales to 30 percent annually for the next three years. After this time, the growth rate in sales is expected to return to the long-term constant rate of 6 percent per year. Assume that the company’s dividend growth rate matches the rate of...
Bell Beauty Company plc has just paid its annual dividend of $6.00 per share. It has...
Bell Beauty Company plc has just paid its annual dividend of $6.00 per share. It has been consistently paying out 30 percent of its earnings in dividends. The beta of the stock of the company is 1.20, the market return is 9.0% and the risk free rate is 4.0%. (i) Estimate the return to stock and estimate its dividend growth rate. (ii) Estimate the intrinsic value P of the stock assuming that the dividend growth you estimated in (i) can...
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.00. It expects to...
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.00. It expects to grow at a constant rate of 3% per year. If investors require a 10% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent. $   per share Zero Growth Stocks: The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is expected...
Q8 9.If your stock paying annual dividends will pay a dividend D1 at t=1 of $1.57...
Q8 9.If your stock paying annual dividends will pay a dividend D1 at t=1 of $1.57 and have a growth rate of  11% between t=1 and t=2, and with a constant growth rate of 5% thereafter into the future, what should be the value of the stock at t=0 if the expected rate of return for the stock is 7%? Notice that in this problem, expected dividends are given at t = 1, not t = 0! Answer to the nearest...
Kmart shares have a beta of 1.05. The company has just paid a dividend of $1.10,...
Kmart shares have a beta of 1.05. The company has just paid a dividend of $1.10, and the dividends are expected to grow at 2.5%. The expected return of the market is 9% and the risk-free rate is 1.5%. The most recent share price for Kmart’s shares is $51. a. Calculate the cost of equity using the dividend growth model method. (10) b. Calculate the cost of equity using the SML method. (10) c. Why do you think your estimates...
1. Best Buy has just paid a dividend of $4 per share (this dividend is already...
1. Best Buy has just paid a dividend of $4 per share (this dividend is already paid therefore it is not included in the current price). The companys dividend is estimated to grow at a rate of 35% in year 1 and 20% in year 2. The dividend is then expected to grow at a constant rate of 9.8% thereafter. The companys opportunity cost of capital is 12% what is the current value of Best Buy stock? 2. General Foods...
A stock you are evaluating just paid an annual dividend of $2.20. Dividends have grown at...
A stock you are evaluating just paid an annual dividend of $2.20. Dividends have grown at a constant rate of 1.4 percent over the last 15 years and you expect this to continue. a. If the required rate of return on the stock is 12.3 percent, what is its fair present value? b. If the required rate of return on the stock is 15.3 percent, what should the fair value be four years from today? Fair present value?____________ Expected fair...
Problem 7-20 Nonconstant Growth Stock Valuation Reizenstein Technologies (RT) has just developed a solar panel capable...
Problem 7-20 Nonconstant Growth Stock Valuation Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, RT is expected to experience a 15% annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and RT's growth rate will slow to 8% per year indefinitely. Stockholders require a return of 11% on RT's stock....
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.30. It expects to...
Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $1.30. It expects to grow at a constant rate of 4% per year. If investors require a 10% return on equity, what is the current price of Hubbard's common stock? Round your answer to the nearest cent. Do not round intermediate calculations. $ per share Zero Growth Stocks: The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is...
Plastic Pretzels stock recently paid a dividend of $1.31 per share. The dividend growth rate is...
Plastic Pretzels stock recently paid a dividend of $1.31 per share. The dividend growth rate is expected to be 6.00% indefinitely. Stockholders require a return of 12.80% on this stock. What is the current intrinsic value of Plastic Pretzels stock? What would you expect the price of this stock to be in one year if its current price is equal to its intrinsic value If you were to buy Plastic Pretzels stock now and sell it after receiving the dividend...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT