Question

The Pioneer Corporation currently paid a $3.00 per share dividend on its common stock. Dividends are...

The Pioneer Corporation currently paid a $3.00 per share dividend on its common stock. Dividends are expected to grow forever at 3%, and investors require a 12% rate of return. Pioneer's management is planning to enter new, risky markets to increase its expected dividend growth. However, in response to the increased risk, the investors' required rate of return will increase to 15%. What must be the new value for the dividend growth to justify entering the new, risky markets and to keep the stock price from decreasing?

Please show/explain using excel

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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
Company X currently paid a $4 per share dividend on its common stock. Dividends are expected...
Company X currently paid a $4 per share dividend on its common stock. Dividends are expected to grow forever at 6% and investors require a 15% rate of return. Company X's management is planning to enter new, risky markets to increase its expected dividend growth. However, due to increased risk, the investors required rate of return will increase to 20%. What must be the new value for the dividend growth to justify entering the new, risky markets and to keep...
Bretton, Inc., just paid a dividend of $3.00 on its stock. The growth rate in dividends...
Bretton, Inc., just paid a dividend of $3.00 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year, indefinitely. Investors require a return of 11 percent on the stock for the first three years, a rate of return of 9 percent for the next three years, and then a return of 7 percent thereafter. What is the current share price for the stock? (Do not round intermediate calculations and round your answer...
Madison Tour, Inc., just paid a dividend of $3.15 per share on its stock. The dividends...
Madison Tour, Inc., just paid a dividend of $3.15 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Assume investors require a return of 11 percent on this stock. What will the price be in 3 years?
The Jackson Company has just paid a dividend of $3.00 per share on its common stock,...
The Jackson Company has just paid a dividend of $3.00 per share on its common stock, and it expects this dividend to grow by 10 percent per year, indefinitely. The firm has a beta of 1.50; the risk-free rate is 10 percent; and the expected return on the market is 14 percent. The firm's investment bankers believe that new issues of common stock would have a flotation cost equal to 5 percent of the current market price. How much should...
Infosys Technologies just paid a dividend of $3.00 per share, and that dividend is expected to...
Infosys Technologies just paid a dividend of $3.00 per share, and that dividend is expected to grow at a rate of 14% for at least the next few years. If we assume that this growth rate will continue forever (in perpetuity), then the Discounted Dividend Model (DDM) tells us that the value of this stock is negative at a discount rate of 9%. true or false?
Ameritech Corporation paid dividends per share of $3.56 in 2018, and dividends are expected to grow...
Ameritech Corporation paid dividends per share of $3.56 in 2018, and dividends are expected to grow 5.5% a year forever. The investors’ required rate of return is 10%. What is the value per share, using the Gordon Growth Model? The stock is trading for $80 per share. What would the growth rate in dividends have to be to justify this price?
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.60 per share on its stock. The...
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.60 per share on its stock. The dividends are expected to grow at a constant rate of 6% per year indefinitely. (a)   If investors require a 12 percent return on its stock, what is the current price? (b) What will the price be in 15 years (at the same rate of return as above)? Please show steps for how to solve in Excel
Cheap & Safe Fuel Energy, Corp. just paid a dividend of $ 3.75 per share. The...
Cheap & Safe Fuel Energy, Corp. just paid a dividend of $ 3.75 per share. The firm’s dividend is expected to grow at 20% for the next five (5) years. After that the growth rate is expected to be 6% forever. If investors require a return of 8% for investing in the stock of companies of similar risk, what is the value of the stock?
Storico Co. just paid a dividend of $1.95 per share. The company will increase its dividend...
Storico Co. just paid a dividend of $1.95 per share. The company will increase its dividend by 24 percent next year and 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 stock price is $40.95, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with...
Purple Inc. recently paid a common stock dividend of $3.00 (D0 = $3.00). They expect their...
Purple Inc. recently paid a common stock dividend of $3.00 (D0 = $3.00). They expect their dividends to grow by 9% per year for 2 years. In year 3, they expect their dividends to start growing at a constant 4% per year forever. You require a 12% return on this stock. What is the most you would be willing to pay for this stock?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT