STAR Company's management estimates to distribute $ 8 of dividend forever. If the required rate on...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
STAR Company's management estimates to distribute $ 8 of dividend forever. If the required rate on the stock of the company is 16 %, how much do you pay for the stock today? 2-) GOOFY Co. has paid out dividend of $ 2 recently. The company expects to have 3 % growth rate in dividends forever. If the required rate of return on the company's stock is 11%, what is the company's stock price per share? 3-) GRANT Inc.'s stocks have a cost of 12 %. The owner of the company expects to give dividend of $ 5.75 per share in the coming year and a growth rate of 5 % in the future. What is the company's stock price in the market now? 4-) Mr. John, the finance manager of MARS Co. expects to have net profit after tax of $ 1,500,000 in the next year. The dividend payout ratio of the firm is 35 % and the firm has 100,000 shares outstanding. Mr. John predicts that the company will have a growth rate of 5.5 % in the future. If the the common stock of the company sells for $30, what is the rate of return on the stock? 5-) A stock is trading at $ 25 now. The stock is expected to have a year-end dividend of $ 2 per share which is expected to grow at a constant rate of g throughout time. If the stock's required rate of return is 14 %, what will be the constant growth rate? 6-) EDDIE Company currently pays a dividend of $5 per share. It is estimated that the company's dividend will grow at a rate of 20 % per year for the next two years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.2, the risk-free rate is 7.5 %, and the market risk premium is 4 %. What would you estimate the stock's current price? 7-) EWALD Corporation is experiencing a period of rapid growth. Dividends are expected to grow at a rate of 15 % during the next 2 years, at 13% in the third year, and at a constant rate of of 6% thereafter. Ewald's last dividend was $ 1.15, and the required rate of return on the stock is 12 %. a-) Calculate the value of the stock today. b-) Calculate P₁ and P₂. c-) Calculate the dividend yield and capital gains yield for Year 1. 8-) What is the price of a common stock that last paid a dividend of $ 0.30 under the following conditions if your required rate of return is 10%? a-) There is no expected growth in dividends. b-) Dividends are expected to grow at a constant rate of 6% per year indefinitely. c-) Dividends are expected to grow at a rate of 12% for three years and then immediately drop to a constant growth rate of 6% indefinitely. 9-) You want to buy a share of ROMAN Co. stock. You expect it to pay dividends of $ 1.07, $ 1.1449, and $ 1.2250 in Years 1,2 and 3 respectively, and you expect to sell it at a price of $ 26.22 at the end of Year 3. If you want 15 % return on this stock investment; a-) Calculate the growth rate in dividends. b-) Calculate the current price of a share. c-) Calculate the expected dividend yield. 10-) UPTON Company's stock is expected to distribute a dividend of $ 2.25 during the coming year. The growth rate on dividends is forecasted to be 3 % indefinitely. The bondholders of UPTON Co. requires 11 % return on their investments. If the stockholders put 4% risk premium on their investments at what price should UPTON's stock sell today? STAR Company's management estimates to distribute $ 8 of dividend forever. If the required rate on the stock of the company is 16 %, how much do you pay for the stock today? 2-) GOOFY Co. has paid out dividend of $ 2 recently. The company expects to have 3 % growth rate in dividends forever. If the required rate of return on the company's stock is 11%, what is the company's stock price per share? 3-) GRANT Inc.'s stocks have a cost of 12 %. The owner of the company expects to give dividend of $ 5.75 per share in the coming year and a growth rate of 5 % in the future. What is the company's stock price in the market now? 4-) Mr. John, the finance manager of MARS Co. expects to have net profit after tax of $ 1,500,000 in the next year. The dividend payout ratio of the firm is 35 % and the firm has 100,000 shares outstanding. Mr. John predicts that the company will have a growth rate of 5.5 % in the future. If the the common stock of the company sells for $30, what is the rate of return on the stock? 5-) A stock is trading at $ 25 now. The stock is expected to have a year-end dividend of $ 2 per share which is expected to grow at a constant rate of g throughout time. If the stock's required rate of return is 14 %, what will be the constant growth rate? 6-) EDDIE Company currently pays a dividend of $5 per share. It is estimated that the company's dividend will grow at a rate of 20 % per year for the next two years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.2, the risk-free rate is 7.5 %, and the market risk premium is 4 %. What would you estimate the stock's current price? 7-) EWALD Corporation is experiencing a period of rapid growth. Dividends are expected to grow at a rate of 15 % during the next 2 years, at 13% in the third year, and at a constant rate of of 6% thereafter. Ewald's last dividend was $ 1.15, and the required rate of return on the stock is 12 %. a-) Calculate the value of the stock today. b-) Calculate P₁ and P₂. c-) Calculate the dividend yield and capital gains yield for Year 1. 8-) What is the price of a common stock that last paid a dividend of $ 0.30 under the following conditions if your required rate of return is 10%? a-) There is no expected growth in dividends. b-) Dividends are expected to grow at a constant rate of 6% per year indefinitely. c-) Dividends are expected to grow at a rate of 12% for three years and then immediately drop to a constant growth rate of 6% indefinitely. 9-) You want to buy a share of ROMAN Co. stock. You expect it to pay dividends of $ 1.07, $ 1.1449, and $ 1.2250 in Years 1,2 and 3 respectively, and you expect to sell it at a price of $ 26.22 at the end of Year 3. If you want 15 % return on this stock investment; a-) Calculate the growth rate in dividends. b-) Calculate the current price of a share. c-) Calculate the expected dividend yield. 10-) UPTON Company's stock is expected to distribute a dividend of $ 2.25 during the coming year. The growth rate on dividends is forecasted to be 3 % indefinitely. The bondholders of UPTON Co. requires 11 % return on their investments. If the stockholders put 4% risk premium on their investments at what price should UPTON's stock sell today?
Expert Answer:
Answer rating: 100% (QA)
1 To calculate the price of the stock today we can use the formula for the dividend discount model Price Dividend Required rate of return Dividend growth rate Plugging in the values given we get Price ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
Students also viewed these finance questions
-
1.Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity? 2....
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Dominic and Magalie have been married for five years and have thes children, aged four, seven and nine. Dominic and Magale are diverong and Magalie has been ordered to pay child support, until the...
-
To reduce the threat of predators, the sand grouse, a bird of Kenya, will lay its eggs in locations well removed from sources of groundwater. To bring water to its chicks, the grouse will then fly to...
-
The parameters of the BiCMOS circuit in Figure P12.40 are \(V^{+}=5 \mathrm{~V}\), \(V_{G G}=2.5 \mathrm{~V}, R_{D 1}=5 \mathrm{k} \Omega, R_{E 2}=1.6 \mathrm{k} \Omega\), and \(R_{L}=1.2 \mathrm{k}...
-
The company has 2,500 shares of common stock outstanding. What is Liberty's earnings per share? a. 2.04 b. 3.6 times c. \(\$ 1.22\) d. \(\$ 3.05\)
-
Coastal Safety manufactures flotation vests in Miami, Florida. Coastal Safety's contribution margin income statement for the most recent month contains the following data: Suppose Dazzle Cruiselines...
-
Problem 5: (a) Using the formula from Section 5.19 in the Notes, find the unique solution of the initial value problem x + x = sint, x(0) = 0, x(0) = 0. Does one get resonance? (b) Using the methods...
-
Humpty and Dumpty, residents of Miami, Florida, had a nasty incident involving a wall, a fall and a broken egg, in which both parties got hurt. Humpty and Dumpty ended up suing each other in Florida...
-
A LL F E D B As shown in the above diagram, Raj folds a rectangular paper ABCD in such a way that side BC becomes BE. If the length of AB is 3 and the length of BC is 15, what is the area of AABF?
-
In the figure, the particles have charges 91 = -92 = 290 nC and 93 = -94 - 98 nC, and distance a = 6.8 cm. What are the (a) x and (b) y components of the net electrostatic force on particle 3? (a)...
-
Brissett Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below: GK LQ XK Selling price per unit $ 3 2 6...
-
5. An investment firm has just been instructed by one of its clients to invest $1,500,000 of his money. The client's goal is to maximize total projected return on investments. The analysts at the...
-
A motorcycle travels along a straight road with the velocity shown on the v-t graph below. Note: The value of maximum velocity is shown in blue. v (ft/s) 60 55- 50 45 40- 35 30- 25 20 15 10 5- 50 5 t...
-
Leo, Ryan, and Matthew regularly interact with one another and share similar values, norms, and expectations. In view of this, which concept MOST applies to their relationship? Group Category...
-
Beaksley, Inc. is a very cyclical type of business which is reflected in its dividend policy. The firm pays a R2,00 a share dividend every other year. The last dividend was paid last year. Five years...
-
CLASS PERIO Solving Linear Equations: Variable on Both Sides Solve each equation. 1) 6r+ 7 = 13 + 7r 3) -7x-3x+2=-8x-8 5)-14 +66+7-26=1+5b 7) n-3n = 14-4n 2) 13-4x=1-x 4)-8-x= x - 4x 6)n+2=-14-n 8)...
-
Marty Not is going to borrow $8,000 for 120 days and pay $215 in interest. What is the annual rate of interest if the loan is discounted?
-
What is the ITC? How does it affect the capital budgeting decision?
-
How is the future value (Appendix A) related to the present value of a single sum?
-
Determine the maximum eccentric load \(P\) the 2014-T6aluminum-alloy strut can support without causing it either to buckle or yield. The ends of the strut are pin connected. a $150 mm 150 mm 100 mm...
-
The W14 \(\times 26\) structural A-36 steel member is used as a column that is assumed to be fixed at its top and pinned at its bottom. If the 15-kip load is applied at an eccentric distance of 10...
-
The W14 \(\times 26\) structural A-36 steel member is used as a 20 -ft-long column that is assumed to be fixed at its top and fixed at its bottom. If the 15-kip load is applied at an eccentric...
Study smarter with the SolutionInn App