Question: what do i do on these steps? Chapter 7 PowerPoint D 0 = $0.50 D0 Current Dividend per share g = 2% g growth rate

what do i do on these steps?
Chapter 7 PowerPoint
D0= $0.50 D0 Current Dividend per share
g = 2% g growth rate of dividend
R = 15% r required rate of return
P = D0 * (1+g) / ( r - g)
Model Price per share $3.92
Chapter 6 and 7 PDF Notes
Example 2: Semi-Annual Payments: Coupon rate = 10%, Par = $1,000, Maturity = 5 years, YTM = 11%
N 10
I/Y 0.055
PMT 50 coupon rate * Par Value
FV 1000
PV ?
($962.31)
Example 4: Suppose a bond with a 10% coupon rate and semiannual coupons, has a face value of $1,000, 20 years to maturity and is selling for $1,197.
N 40
PMT 50
FV 1000
PV -1197
I/Y 4% Equal to Semiannual Yield
8% Equal to Annual yield Remember to multiply by 2 to convert to annual
Suppose Big D, Inc. just paid a dividend of $1. It is expected to increase its dividend by 2% per year. If the market requires a return of 15% on assets of this risk, how much should the stock be selling for?
current dividend D0 1
growth rate of dividends
g 2%
required return r 15%
Model Price per share
P0 $7.85
Expected dividend D1 1
growth rate of dividends
g 2%
required return r 15%
Model Price per share
P0 $7.69
Example 4: P0 = $10.50, D0 = $1, g = 5% per year. What is the required return?
P0 10.5
D0 1
g 5%
r ?
P=D0*(1+g)/(r-g)
r=D0*(1+g)/P0 + g 15.00%

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