A stock is expected to pay dividends of $1.45 per share in Year 1 and $1.68 per share in Year 2. After that, the dividend is expected to increase by 3.5% annually. What is the current value of the stock at a discount rate of 15% (in $ dollars)? $

A stock is expected to pay dividends of $1.45 per share in Year 1 and $1.68 per share in Year 2. After that, the dividend is expected to increase by 3.5% annually. What is the current value of the stock at a discount rate of 15% (in $ dollars)? $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

See similar textbooks

Related questions

Q: Investors believe that a certain stock will pay a $4 dividend next year. The market price of the…

A: We require to calculate the long run growth rate in dividends from the following details given in…

Q: General Distributor’s common stock dividends have been growing at an annual rate of 3.5% per year…

A: What is the current value of a share:- Current value of share = $ 33.87 EXPLANATION:- Given…

Q: Assume ZYX stock generated earnings of $1.75 per share this year. What should the stock price be if…

A: Earning per share = $ 1.75 Payout ratio = 40% Dividend per share (D0) = 1.75*0.40 = $ 0.70 Annual…

Q: Summerdahl Resort's common stock is currently trading at $31 a share. The stock is expected to pay a…

A: In this case, to calculate the cost of equity we have to use the following formula: Price of share…

Q: RTF, Inc. common stock sells for $22 a share and pays an annual dividend that increases by 3.8…

A: Dividends are annual yield paid against the capital acquired by issuing equity.

Q: share

A: Formula to calculate the price of the stock is: P = D1/(1+r)^1 + D2/(1+r)^2 +…

Q: The common stock of Bethel Baked Goods is valued at $8.76 a share. The company increases its…

A: Goods valued = 8.76 Growth rate of dividend = 1.5% Dividend = 0.65 Current Stock Price = Expected…

Q: National Corporation expects to pay a dividend of P5 per share at the end of year one, P9 per share…

A: The most latest price at which a security was sold on an exchange is the current price. Buyers and…

Q: Albright Motors is expected to pay a year- end dividend of $3.00 a share (D1 = $3.00). The stock…

A: In the given question we need to compute the constant growth rate (g) applying dividend growth…

Q: A business’s ordinary shares are currently trading at £2.00 (ex dividend) each in the capital…

A: Given the following information: Price of shares: $2 per share Next year's dividend: $0.14 per…

Q: A business’s ordinary shares are currently trading at £4.00 (ex dividend) each in the capital…

A: Given the following information: Price of shares: $4 per share Next year's dividend: $0.22 per…

Q: Perry Motors' common stock just paid its annual dividend of ¢1.80 per share. The required return on…

A: The stock price can be calculated by the formula of dividend discount model given by P0 = D0×1+gr-g…

Q: to pay a $1.60 per share dividend at the end of the year (i.e., D1 = $1.60). The dividend is…

A: Given, D1 = $1.6 per share Dividend growth rate = 0.1 or 10% Required required rate of return = 17%…

Q: Summerdahl Resort's common stock is currently trading at $33 a share. The stock is expected to pay a…

A: Given data; Stock price = $33 expected dividend = $3 growth rate =4%

Q: The common stock of Balinger Machines pays an annual dividend that is expected to increase by 8%…

A: The expected dividend (D1) can be calculated with the help of dividend growth model

Q: Cox Footwear pays a constant annual dividend. Last year, the dividend yield was 2.5 percent when the…

A: Given information in question Last year dividend yield = 2.5% Last year stock price…

Q: Tresnan Brothers is expected to pay a $2.9 per share dividend at the end of the year (i.e., D1 =…

A: Stock’s value per share can be calculated using dividend discount model. Here, Next dividend ,…

Q: Tresnan Brothers is expected to pay a $1.80 per share dividend at the end of the year (i.e., D1 =…

A: The formula to calculate stock value is given below:

Q: A common stock pays a current dividend of $2. The dividend is expected to grow at an 8-percent…

A: Current dividend =$2 Growth rate =8% Discount rate =12%

Q: A common stock will pay a cash dividend of $4 next year. After that, the dividends are expected to…

A: given information cash dividend = $4 dividends are expected to increase indefinitely at 2% per year.…

Q: An issue of common stock currently sells for $50 per share and expected to pay $4 dividend per share…

A: Expected return = [ ( Expected dividend / Current Price ) + Growth rate ]

Q: Common stock of NTB is currently paying Rs. 4/= per share dividend and is expected to grow at a rate…

A: The stock price may be determined by discounting the dividend paid by the company over its lifetime.

Q: Green Company's common stock is currently selling at $24.00 per share. The company recently paid…

A: Required Rate of Return: The required rate of return is the return which the company has to earn in…

Q: CDB stock is currently priced at $65. The company will pay a dividend of $4.89 next year and…

A: Given: Stock price = $65 Expected dividend = $4.89 Required return = 11.2%

Q: Boehm Inc. is expected to pay a S1.50 per share dividend at the end of this year (i.e., D1 = S1.50).…

A: Value of the stock is referred as current price of the share which is the most recent selling price…

Q: An issue of common stock currently sells for $60 per share and expected to pay $4 dividend per share…

A: Given the following information: Current price of stock: $60 per share Estimated dividends for the…

Q: A preferred stock will pay a dividend of $1 per quarter. If the annual return is 6.06%, what is the…

A: Here, Dividend per Quarter is $1 Therefore, Dividend per year will be: =$1*4 =$4 Annual Return is…

Q: Each quarter, Crane, Inc., pays a dividend on its perpetual preferred stock. Today the stock is…

A: Those stocks that are prioritized over common stocks at the time of payment of dividends but did not…

Q: What is the total rate of return on the stock? b. What are the dividend yield and percentage…

A: Dividend Yield: It represents the portion of the firm's share price that pays dividends. Hence, it…

Q: Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for…

A: The trading activities of the company are being considered on the basis of current price. The…

Q: Perry Motors’ common stock just paid its annual dividend of ¢1.80 per share. The required return on…

A: We need to use constant growth model to calculate stock price under first two assumptions Stock…

Q: A stock has just has paid a dividend has declared an annual dividend of $12.00 to be paid one year…

A: In this question we require to calculate the P0 i.e. Current price of the Stock.

Q: What is the dividend yield on Stock A that sells at $20/share, when Company A pays a quarterly…

A: The dividend yield is a financial metric that represents the proportion of dividend paid out by the…

Q: CSY Bhd is expected to pay a RM 0.50 per share dividend at the end of the year (that is, D1 = RM…

A: Stock is issued by a corporation in the financial markets for attaining and acquiring required and…

Q: value of the stock be today

A: The price of the stock is the maximum price that an investor pays on a per-share basis. It is found…

Q: A company is going to pay $.35, $.50, and $.80 a share over the next three years. After that, the…

A: First step is to compute the price prevailing at the end of Year-3 on the basis of annual dividend…

Q: the investor's required rate of return is 15 percent, the expected level of earnings at the end of…

A: Price of equity can be determined by the dividend discount model and P/E ratio method.

Q: Whizzkids, Inc., is experiencing a period of rapid growth. Earnings and dividends per share are…

A: Present value (PV) is the current value of a future sum of money or a stream of cash flows, given a…

Q: Consider the stock of BIC Company has an annual dividend of $3 in the last year. The dividend is…

A: Dividend last year= $3 Growth rate = 7% Required return = 11%

Q: Given that the cost of common stock is 15 percent, dividends are P1.50 per share, and the price of…

A: To calculate the growth rate we will use the dividend grow modal formula P0 = D1/(r-g) Where P0 -…

Q: A stock has just has paid a dividend has declared an annual dividend of $12.00 to be paid one year…

A: In the given question we require to compute the P0 i.e. Current stock price from the given details.…

Q: Company X is expected to pay an end-of-year dividend of $5 a share. After the dividend its stock is…

A: Market capitalization is the total value of all the company's stock. It is the total valuation of…

Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

A stock is expected to pay dividends of $1.45 per share in Year 1 and $1.68 per share in Year 2. After that, the dividend is expected to increase by 3.5% annually. What is the
current value of the stock at a discount rate of 15% (in $ dollars)? $

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Stock price using dividend yield method:

VIEW

Step 2 Calculation of stock price:

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Follow-up Questions

Read through expert solutions to related follow-up questions below.

Follow-up Question

Solution

by Bartleby Expert

SEE SOLUTION

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A common stock pays an annual dividend per share of $2.10. The market capitalization rate (required return on equity) is 11.5%. If the annual dividend is expected to remain at $2.10, what is the value of the stock? Round your answer to two decimal places.
A stock is expected to pay dividends of $1.45 per share in Year 1 and $1.68 per share in Year 2. After that, the dividend is expected to increase by 3.5% annually. What is the current value of the stock at a discount rate of 15% (in $ dollars)?
A stock is expected to pay dividends of $1.38 per share in year 1 and $1.53 per share in year 2. After that, the dividend is expected to increase by 2.9% annually. What is the current value of the stock at a discount rate of 15.4% ?
Company X is expected to pay an end-of-year dividend of $5 a share. After the dividend its stock is expected to sell at $110. If the market capitalization rate is 8%, what is the current stock price?
A stock pays a dividend of $1.21 annually. If the dividend yield is 5.8 %, what is the price of the stock?
A stock is expected to pay a dividend of $3.00 per share in year 1. The stock price after one year is expected to be $80 per share. The equity cost of capital is 10%, whereas the risk-free rate is 2%. What is the current stock price? O $72.73 $75.45 $81.37 $830.00
A stock is selling today for $75 per share. At the end of the year, it pays a dividend of $6 per share and sells for $81. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $69. What are the dividend yield and percentage capital gain in this case?
A stock pays a dividend at the end of this year of $3.50. Dividend's growth rate is 2 percent each year. The required rate of return on the stock is 20 percent. What is the fair price of the stock?