Question

Now or Later, Inc. pays an annual dividend to its shareholders. The firm paid a dividend of $0.50 six months ago and the next dividend will be paid 6 months (half a year) from today. Investors expect the next four annual dividend to be $1.00, $2.00, $3.00, and $4.00. After that, investors expect the dividend to grow at 5% per year, forever. What is one share of this stock worth today if the required return is 8%. Round your final answer to the nearest tenth of a dollar (e.g., $92.1)

Answer #1

8.0000% | ||

Cash flows | Year | Discounted CF |

1.00 | 0.5 | 0.96 |

2.00 | 1.5 | 1.78 |

3.00 | 2.5 | 2.47 |

4.00 | 3.5 | 3.06 |

140.00 | 3.5 | 106.94 |

price of the share = 115.22

Now or Later, Inc. recently paid $2.10 as an annual dividend.
Future dividends are projected at $2.11, $2.28 and $2.99 over the
next three years, respectively. At the end of the third year, you
expect to sell the stock for $25.5. The stock of the company is
selling for $33 today. How much is expected return from your
investment in the stock?

A.
The James Clothing Co. pays a constant annual dividend of $4.00
per share. What is one share of this stock worth to you today if
you require a 27 percent rate of return?
B.
LB Moore has 33,000 shares of common stock outstanding. The firm
just paid an annual dividend of $2.00 per share on this stock. The
market rate of return is 16.00 percent. What will one share of this
stock be worth one year from now if...

New Gadgets, Inc., currently pays no dividend but is expected to
pay its first annual dividend of $5.40 per share exactly 5 years
from today. After that, the dividends are expected to grow at 3.7
percent forever. If the required return is 12.3 percent, what is
the price of the stock today?

Maroon Inc. just paid a $1.57 dividend and investors expect that
dividend to grow by 5% each year forever. If the required return on
the stock investments is 14%, what should be the price of the stock
in 4 years?

Alberto Inc. just paid its annual dividend of $2.00
per share. The firm is expected to grow at a rate of 10 percent for
the next two years and then at 6 percent per year thereafter. The
required return of Alberto Inc. is 12%. Find the expected price of
the stock in one year, P ̂_1.

A company just paid out an annual dividend of $4. The dividend
amount will grow at 5% annually forever. If you buy a share today
and sell it at year 4, how much of a capital gain (not including
the dividend yield) would you expect? Assume that the required rate
of return for this stock is 20%.
Group of answer choices
$6.98
$6.03
$6.45
$5.77

1. IBM pays dividends once a year. The company just paid a
dividend of $3.50 and management expects this dividend to
grow at a constant rate of 6.5 percent forever. If the
required rate of return is 15 percent, what is the
price of this stock?
2. An investment requires you to deposit $5,000 into an account
today. If the compound rate of growth is
8 percent per year, what will this investment be worth in 30
years?

RBC stock pays a quarterly dividend and is expected to pay $1
per share in 3 months from today. Assume investors wish a return of
?^(4)=10%, and they expect the dividends to grow at a rate of
?^(4)=5%. Assume they expect the dividends to grow at this rate
forever. Show all of your work!
a.) What is the current value of one RBC share?
b.) Suppose investors are mistaken and the growth rate for the
dividends is really ?^(4)=3%. How...

Wicked Textiles Inc. just paid its annual dividend of $2.50 per
share. The dividends are expected to grow for the next 2 years at
10% rate, and then slow down to a 4% annual rate forever. If
investors require 15% return:
8) What is the terminal value of Wicked Textiles in Year 2
(P2)?
9) What should be the current stock price of Wicked
Textiles?
10.) What is the current price of a $1,000 par value Treasury
bond maturing in...

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?

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