Question: A stock is expected to pay its first $ 640 dividend in 1 year from now. The dividend is expected to be paid annually forever

A stock is expected to pay its first $640 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by -2% pa (note the negative sign). The discount rate is 4% pa. Estimate the current stock price. calculate the current stock price.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

We can use the Gordon growth model to estimate the current stock price The G... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

What is the NPV for the following project cash flows at a discount rate of 15%? C0=-1,000, C1=700, C2=700 SOB Floor Company has a risk premium of 21% and a beta of 3. If the risk free rate is 3%,...

A stock is expected to pay dividends of $2.00 and $2.20 in the next two years and sell for a price of $45 at the end of two years. What will an investor who expects a 10 percent rate of return be...

3. We consider a motion of a projectile with air resistance. Let z be a horizontal coordinates z a vertical coordinate, the equation of motion is =-k(x) + (y') z mz" -k(x) + (y) ' - mg = where the...

A stock is expected to pay its first $ 1 4 0 dividend in 1 year from now. The dividend is expected toFind the market - implied total required return on equity of buying a $ 3 1 0 stock now that's...

A stock is expected to pay its first $ 1 4 0 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by - 2 % pa ( note the negative sign ) . The discount rate is 2...

A stock is expected to pay its first $780 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by 5% pa. The discount rate is 6% pa. Estimate the current stock...

Please answer ASAP A stock is expected to pay its first $ 740 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by 5 % pa. The discount rate is 6 % pa....

A stock is expected to pay its first $ 80 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by -3 % pa (note the negative sign). The discount rate is 2 % pa....

A stock is expected to pay its first $60 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by -3% pa (note the negative sign). The discount rate is 6% pa....

A stock is expected to pay its first $ 940 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by -3 % pa (note the negative sign). The discount rate is 2 % pa....

For each scenario described below, state whether or not the binomial distribution is a reasonable model for the random variable and why. State any assumptions you make. (a) A production process...

Use both scatterplots for actual and predicted temperature in Figure 7.6. a. Insert a best-fit line in the given scatterplot. b. Estimate or compute r and r2. Based on your value for r2, determine...

Multiple Choice 6 points Assume that the British pound and Swiss franc are highly correlated. ash outflows in pounds. During a q , cycle, the firm is q , affe weak dollar; not weak dollar; favorably...

Vector A=1.00i+2.00jA=1.00i^+2.00j^ and vector B=3.00i+4.00jB=3.00i^+4.00j^. What are the magnitude and direction of vector C=3.00A+4.00BC=3.00A+4.00B ?

Harwood Medical Instruments PLC (HMI), based just outside of Birmingham, England, manufactured specialty medical instruments and sold them in market niches that were becoming increasingly competitive...

Elisa Manning teaches business courses at a small liberal arts university located on the prairies. Since roughly 12% of the students attending her university are Indigenous, she has been asked to...

The following data were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet for April 30 for Abigail Trucking: Accounts Payable $42,600 Accounts Receivable 83,400...

Steve (age 40) and Edie (age 39) Brady are married. Steve works as a retail manager and Edie is a self-employed architect but does not maintain a home office. She does NOT qualify for the Qualified...

Find the total area bounded by the x-axis and the curve y=f(x) on the indicated interval.f(x)=x2-x-2;[-5,0]

Graph the curve whose parametric equations are given and show its orientation. Find the rectangular equation of each curve. x = 2cost, y = 3sint; 0 t

For a circle of radius r, a central angle of degrees subtends an arc whose length s is s = /180 r. Discuss whether this is a true or false statement. Give reasons to defend your position.

Write the expression in the standard form a + bi. (1 - 5i ) 8

A recent article in The Washington Post Weekly Edition indicated that about 80% of the estimated $200 billion of federal housing subsidies consists of tax breaks (mainly deductions for mortgage...

Pfizer, Inc., a major U.S. pharmaceutical company, is developing a new drug aimed at reducing the pain associated with migraine headaches. Two drugs are currently under development. One consideration...

The College Boards Annual Survey of Colleges provides up-to-date information on tuition and other expenses associated with attending public and private nonprofit institutions of postsecondary...