Pabloski Co. has just paid a cash dividend of $4 per share. Investors require a 16%...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Pabloski Co. has just paid a cash dividend of $4 per share. Investors require a 16% return from investments such as this. The company claims that its dividend is expected to grow at 7% per year indefinitely. a) What will the stock be worth in five years? (5 points) b) What would the stock sell for today if dividend was expected to grow at 21 % per year for the next 3 years and then settle down to 9% per year indefinitely? (10 points) Pabloski Co. has just paid a cash dividend of $4 per share. Investors require a 16% return from investments such as this. The company claims that its dividend is expected to grow at 7% per year indefinitely. a) What will the stock be worth in five years? (5 points) b) What would the stock sell for today if dividend was expected to grow at 21 % per year for the next 3 years and then settle down to 9% per year indefinitely? (10 points)
Expert Answer:
Answer rating: 100% (QA)
To calculate the stock value we can use the dividend discount model DDM formula The DDM formula is as follows Stock Value Dividend Required Rate of Re... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
Students also viewed these finance questions
-
Given the following information, calculate the expected return and standard deviation for a portfolio that has 45 percent invested in Stock A, 35 percent in Stock B, and the balance in StockC. State...
-
In Exercises, match the correct graph AF to the function without using your calculator. Then, if you have a graphing calculator, use it to check your answers. Each graph in this group shows x and y...
-
a. Describe briefly the legal rights and privileges of common stockholders. b. What is free cash flow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?...
-
You have the following information on two bonds Bond 1 Bond 1 Type Coupon Zero Coupon Term (Yrs) 3 3 Payment Frequency Annual Annual Face Amount ($) $25,000 $25,000 Coupon (%) 6% NA a. Calculate the...
-
The wake of a speedboat is 15o in a lake where the speed of the water wave is 2.2km/h. What is the speed of the boat?
-
A jet plane travels through the air with a speed of 600 mi/h at an altitude of 20000 ft, where the pressure is 5.75 lbf/in 2 and the temperature is 25 F. Consider the diffuser of the engine where air...
-
What questions to ask a witness in a deposition?
-
Manceville Air has just produced the first unit of a large industrial compressor that incorporated new technology in the control circuits and a new internal venting system. The first unit took 112...
-
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,100,000. The project began in 2021 and was completed in 2022. Data relating to the contract are summarized...
-
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and...
-
The environment or external factors which impact consumer behavior are extremely diverse. Develop a main response, in which you address the following: Using a product or service you are familiar...
-
Matt earned $310 in interest for a $2,785 loan. The simple interest rate was 18.99%. What was the term of this loan?
-
This film is largely about class tension - between the haves and the have-nots. Between those who are wealthy, and those who have to live on their weekly paychecks. What scenes/dialogue illustrate...
-
Suppose you know the following information about two stocks: Stock Average Monthly Return Annualized Risk - Free Rate Standard Deviation of Monthly Returns A 0 . 9 % 0 . 6 % 1 . 8 % B 0 . 8 % 0 ....
-
Able, Inc. is a duly-organized California corporation in the business of making plastic forms for lawnmowers and leaf blowers. Bill, Connie and Ed are the directors and Francis is the president. Able...
-
Jane ate 1 plate of spaghetti with meat balls - 60 grams of carbohydrate, 30 grams of protein and 20 grams of fat. Calculate the total calories and the percentage of each nutrient? a. What is the...
-
The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year are as follows: January 1 finished goods, $765,000; December 31 finished goods, $540,000; and...
-
In the simple quantity theory of money, what will lead to an increase in aggregate demand? In monetarism, what will lead to an increase in aggregate demand?
-
Start with the partial model in the file Ch04 P35 Build a Model.xlsx from the textbook's Web site. Answer the following questions, using the spreadsheet model to do the calculations. a. Find the FV...
-
Mark Collins, luthier and businessman, builds and sells custom-made acoustic and electric stringed instruments. Although located in Maryville, Tennessee, he purchases raw materials from around the...
-
Wilson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850....
-
Use the Allstott 2020 income statement that follows and the balance sheet from exercise 10-6 to compute the following: a. Allstott's rate of inventory turnover and days inventory outstanding for 2020...
-
Use the financial statements of Allstott, Inc., in exercises 10-6 and 10-7. 1. Compute the company's debt ratio at December \(31,2020\). 2. Compute the company's times-interest-earned ratio for 2020....
-
Use the financial statements of Allstott, Inc., in cxercises 10-6 and 10-7 to compute the following profitability measures for 2020. Show each computation. a. Return on sales b. Asset turnover c....
Study smarter with the SolutionInn App