Question

21. Solar Co. just paid a dividend of $1.60. Analysts expect the
company's dividend to

grow by 12% for 3 years and then the rate of growth changes to 6%
per year from Year 4

onwards. Determine the value of this stock if the required rate of
return is 8%?

(a) What is the total present value of the dividends for the
first 3 years (stage I)

(b) What is the present value of cash flows during the stage II

(c) What is the price of this stock?

Answer #1

The In-Tech Co. just paid a dividend of $1 per share. Analysts
expect its dividend to grow at 25% per year for the next three
years and then at a constant growth rate per year thereafter. The
estimate of the constant growth rate of dividends is based on the
long term return of equity 25% and payout ratio 80%. If the
required rate of return on the stock is 18%, what is the current
value of the stock? Clearly show...

A company just paid a dividend of D0 = $3.75.
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 9.00%.
What is the best estimate of the stock’s current market value?

Barden Corp. just paid a dividend of D0 = $1.50.
Analysts expect the company's dividend to grow by 30% for the next
two years and at a constant rate of 5% in Year 3 and thereafter.
The required return on this stock is 9.00%. What is the best
estimate of the stock’s current fair value?
a. $47.09
b. $49.43
c. $54.99
d. $59.93
e. $68.45

Nachman Industries just paid a dividend of D0 =
$2.50. 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 9.00%.
What is the best estimate of the stock’s current market value? Do
not round intermediate calculations.
Please show work

Ralph Industries just paid a dividend of D0 = $1. 5. 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 9%. What is the best
estimate of the stock’s current market value? *
a) $50.20
b) $50.98
c) $60.98
d) $45.80

Stella Corporation just paid a $3.00 dividend this morning.
Analysts believe that the company's dividends will grow 30% per
year for each of the next 2 years. after the second year, analysts
believe that dividends will grow constantly into the foreseeable
future at 4% per year. if analysts believe that Stella Corporation
stock should earn a required return of 12% per year, what is the
intrinsic value of a share its stock today?

Library Co. just paid a dividend of $2.75 per share. The
analysts’ consensus is that its dividends will be increased by 4%
next year. Dividends are expected to grow at the rate of 3% per
year, forever, after that. For this problem, assume a market
capitalization rate (k) of 10%.
- Calculate Library’s dividends per share in years 1, 2 and
3.
- Calculate the intrinsic value of a share of Library Co.
today.

Analysts expect MC, Co. to maintain a dividend payout
ratio of 35% and enjoy an expected growth rate of 12% per year for
the next 5 years. After the fifth year, all earnings will be paid
out as dividends. The required rate of return on MC, Co equity is
8%. Given that the last dividend paid was $0.5, at what price would
the analysts currently value the stock under their own
expectations?

IBM just paid a dividend of $1.2 per share. You expect IBM's
dividend to grow at a rate of 10% per year for the next three
years, and then you expect constant dividend growth of 5% forever.
Based on the risk of IBM stock, you require a return of 8%. Using
the dividend discount model, what is the value of IBM stock?

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

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