A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price? Select the correct answer. a. $22.03 b. $21.43 c. $20.83 d. $20.23 e. $19.63

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price? Select the correct answer. a. $22.03 b. $21.43 c. $20.83 d. $20.23 e. $19.63

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 16P: Crisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year...

See similar textbooks

Related questions

Q: ACB stock is currently priced at $87 per share. The company will pay a dividend of $5.77 next year…

A: Current Stock price (P0) =$87 Next year dividend (D1)= $5.77 Required return (ke) = 11.50%

Q: A common stock has expected year-end dividend is D1 = ₱1.60, its required return is rs = 11.00%, its…

A: growth rate = expected return - dividend yield = 11 - 6 = 5% dividend yield = dividend/price price…

Q: A firm's stock has a required return of 9.00%. The stock's dividend yield (using the dividend to be…

A: A dividend is a return received by an investor from an investment made in the company. In the case…

Q: A stock is expected to pay a dividend of Php0.75 at the end of the year. The required rate of…

A: Expected dividend (D1) = Php 0.75 Required return (rs) = 10.5% Growth rate (g) = 6.4%

Q: A stock just paid a dividend of $3.10 and is expected to grow its dividends indefinitely at a…

A: Stock is issued by the company in order to raise its capital. These are the real owners of the…

Q: .

A: As per Gorden Model Price of Stock = Expected Dividend / ( Expected return - Growth rate )

Q: A stock is expected to pay a dividend of $0.55 at the end of the year. The required rate of return…

A: To calculate the price of share or stock, we have to use the following formula: Price of stock =…

Q: A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per…

A: Total yield is divided into Dividend yield and % capital gain yield

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: Stock's Current Price = Dividend / ( Required rate of return - growth rate)

Q: A stock is expected to pay a dividend of $1.65 at the end of the year. The required rate of return…

A: Expected dividend (D1) = $ 1.65 Required return (rs) = 9.32% Growth rate (g) = 7.2%

Q: A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this…

A: Here, D0=$1 growth rate "g" = 5.4% required rate of return "r" = 11.4%

Q: A stock is expected to pay a $1.90 dividend. The expected return of the stock is 13.7% and dividends…

A: This Question is based on dividend discount model. We are required to calculate the value of stock

Q: A stock will pay 1.8 OMR dividends next year, and it has a dividend growth rate of 3% Requind return…

A: The Dividend Growth Model refers to a model that helps in calculating the intrinsic value of a stock…

Q: A stock is expected to pay a dividend of $1.25 at the end of the year. The required rate of return…

A: Formula to be used : Current price=D1/(Required return-Growth rate)

Q: An investor is interested in purchasing XYZ share which is currently trading at a market price of…

A: The per share dividend can be calculated with the help of dividend discount model.

Q: A share of common stock has just paid a dividend of $3.00. If the expected long-run growth rate for…

A: The market value of the stock is the current stock price in the market at which the trading of the…

Q: A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per…

A: Part a: We can determine the values by using the steps below:

Q: Woidtke Manufacturing’s stock currently sells for $22 a share. The stockjust paid a dividend of…

A: Computation:

Q: Hall and Marks is expected to pay a $2.60 per share dividend at the end of the year (that is…

A: Expected dividend at the end of the year (D1) = $2.60 Dividend growth rate (g)=3% Required rate if…

Q: A stock is expected to pay a dividend of $1.67 at the end of the year. The required rate of return…

A: A stock is expected to pay a dividend of D1 = $1.67 at the end of the year. The required rate of…

Q: A stock is expected to maintain a constant dividend growth rate of 4.7 percent indefinitely. If the…

A: Dividend growth rate = 4.7% Dividend yield =6%

Q: What is the estimated value per share of Boehm stock?

A: Market value par share = D1/ (rs-g) D1 = Next dividend rs = required rate of return g = growth…

Q: A preferred stock will pay a dividend of $2.75 in the upcoming year, and every year thereafter,…

A: In the given question we are required to calculate the intrinsic value of preferred stock using…

Q: LotsaDough's common stock is expected to pay a dividend of $1.20 next year, with a forecasted…

A: Next year dividend (D1) = $1.20 Growth rate (g) = 0.07 Stock price (P0) = $12.50 Cost of common…

Q: Each of two stocks, C and D, are expected to pay a dividend of $3 in the upcoming year. The expected…

A: The calculation is:

Q: A stock you are evaluating just paid an annual dividend of $2.80. Dividends have grown at a constant…

A: Given details are : Recent dividend (D0) = $2.80 Growth rate (g) = 2.6% = 0.026 Required rate of…

Q: A share of Koko's common stock just paid a dividend of $1.00. If the expected long-run growth rate…

A: Given information: Dividend paid (D0) : $1 Growth rate (g) : 5.4% Required return (r) : 11.4%

Q: A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected…

A: Stock is expected to pay a year-end dividend, D1 = $2.00 Dividend is expected to decline at a rate,…

Q: A company is expected to maintain a constant 3 percent growth rate in its dividends indefinitely. If…

A: Required Return: It is the rate of return which is the least satisfactory return an investor may…

Q: A stock just paid a dividend of $1.70 and is expected to grow its dividends indefinitely at a…

A: Given: D0 = Recent dividend = $1.70 Growth rate = 2.2% Discount rate = 14%

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: Given: Expected dividend = $0.75 Required rate = 10.5% Growth rate = 6.4%

Q: Consider the following two stocks: - Stock A is expected to pay a dividend of $12 forever; -…

A: Value of stock can be found out from the constant dividend growth model and from dividends and…

Q: A stock is selling for $50 in the market. The required rate of return is 9%. The most recent…

A: Current Stock price(P) is $50 Required rate of return(r) is 9% Latest Dividend is $3.0 Dividend…

Q: Each of two stocks, A and B, is expected to pay a dividend of $2 in the upcoming year. You require…

A: A model that helps to evaluate the value of the stock with the assumption that the dividend will…

Q: A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per…

A: Given: Beginning stock price =$50 per shareEnding stock price =$58 per shareDividend per share =$3…

Q: Consider the following three stocks a. Stock A is expected to provide a dividend of 20 a share…

A: Value of the stock is the present value of the future payments. Future payments includes dividend…

Q: stock's

A: Formula to calculate the stock prce is: P0 = D1/r - g Where P0 is the stock price, D1 is the…

Q: An investor is interested in purchasing XYZ share which is currently trading at a market price of…

A: Market price = P 200 Intrinsic value (P0) = 200-50 = P 150 Growth rate (g) = 2% Required return (r)…

Q: A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per…

A: Gordon's growth model is one of the most commonly used variations of the dividend discount model.…

Q: A stock has a required rate of return of 14.36%, and it sells for $42.36 per share. The dividend is…

A: Share price (P0) = $ 42.36 Growth rate (g) = 4.4% Required return (r) = 14.36% Expected dividend =…

Q: A stock is expected to pay a dividend of $2 at the end of the year.The required rate of return is rs…

A: Computation:

Q: Assume a stock paid a dividend of $1 per share over the last year, the required rate of return on…

A: Calculation of Intrinsic Value of Stock:The required return of the stock is less than the growth…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: The share price is the current market price of the share. It is the price of the share at any…

Q: A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return…

A: Current price of stock is calculated using following equation Price of stock = D1 / (r-g) Where, D1…

Q: A stock is expected to pay a dividend of $3.60 in the next year and thereafter it is expected to…

A: Current fair value for the stock is the current value of the stock. Current value of the stock is…

Q: Super Carpeting Inc. (SCI) just paid a dividend (D₀) of $1.44 per share, and its annual dividend is…

A: Dividend refers to the net amount of distribution made by the company to its shareholders both…

Q: Lincoln Incorporated is expected to pay a $4.5 per share dividend at the end of this year (i.e., D1…

A: The required rate of return is the percentage figure that an investor has anticipated to realize…

Question

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r_s = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price?

Select the correct answer.

a. $22.03

b. $21.43

c. $20.83

d. $20.23

e. $19.63

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution