Skip to main content
Question
Earthly Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all future dividends will be increased by 2.8% each year forever. What is the fair price of the stock if an investor requires a 14% rate of return?
 
Group of answer choices
$12.95
$13.31
$13.68
$14.07
Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
Not helpful? See similar books
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Common Stock: Characteristics, Valuation, And Issuance. 16P
Learn more about
Stock Valuation
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Finance Q&A

Find answers to questions asked by students like you.

Q: Earthly Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all…

A: Current dividend = $1.45 Expected dividend = Current dividend *(1+ Growth rate) Expected dividend =…

Q: Healthy Foods just paid its annual dividend of $1.62 a share. The firm recently announced that all…

A: Dividend discount model is a security valuation method which is used to forecast or predict the…

Q: Cuban Corporation will pay a dividend of $3.06 per share next year. The company pledges to increase…

A: Using Gordon Growth Model, we can determine the price of the stock today. The constant growth model…

Q: Sandhill Tire Co. just paid an annual dividend of $1.20 on its common shares. If Sandhill is…

A: Under dividend growth model, valuation of common stock is done by assuming that dividends keep…

Q: Lightscape FX, an exterior landscape lighting company, paid an annual dividend of R1,42 a share last…

A: Here, Last Dividend Paid is R1.42 Dividend in Year 1 is R1.50 Dividend in Year 2 is R1.75 Dividend…

Q: Hudson Corporation will pay a dividend of $3.02 per share next year. The company pledges to increase…

A: Using Dividend Discount Model

Q: Hudson Corporation will pay a dividend of $2.70 per share next year. The company pledges to increase…

A: Stock Price is computed by adding discounted value of future benefits that investor will receive by…

Q: Whitewall Tire Co. just paid an annual dividend of $1.60 on its common shares. If Whitewall is…

A: Formulas: Cost of common stock = (Expected dividend / Price) + Growth rate

Q: A firm paid an annual dividend of $1.37 a share last month. Today, the company announced that future…

A: In this question we required to compute the price we are willing to pay for one share of stock today…

Q: Sessler Manufacturers made two announcements concerning its common stock today. First, the company…

A: Dividend paid next year then D1= 1.75 Growth rate = 1.5% Required return =14%

Q: HQZ Inc., has just paid a dividend of $4.9 per share and has announced that it will increase the…

A: INTRODUCTION:  Current Divident = 4.90 Each year increase by = 2.36 Discount rate = 9.43% Current…

Q: HQZ Inc., has just paid a dividend of $4.49 per share and has announced that it will increase the…

A: Present value of all the dividends paid for next 4 years is the price expected to be paid. Dividends…

Q: Bates, Inc. pays a dividend of $1 and is currently selling for $32.50. If investors require a 12…

A: We need to compute the growth rate in the given question. We can compute the growth rate using…

Q: Mclver's Meals, Inc. currently pays a OMR2 annual dividend. Investors believe that dividends will…

A: Excel workings:

Q: Hubbard Industries just paid a common dividend, D0, of $1.30. It expects to grow at a constant rate…

A: The dividend discount model is used as a means to determine the value of a share based on the sum of…

Q: Oman Group just paid an annual dividend of OMR 2.45 a share. The firm plans to increase the annual…

A: Therefore, the price of the stock is OMR 34.27.

Q: Magic Company pays a $2.10 annual cash dividend (D0) and it plans to keep the dividend at $2,10 for…

A: Dividend Discount Model refers to a model which is being used in order to predict or find out the…

Q: Babbalu Inc. just paid a dividend of $1 per share. Babbalu expects to increase its annual dividend…

A: Given that the dividend just paid is $1.The dividend growth is expected to be 20% per year for next…

Q: CEPS Group just paid an annual dividend of OMR 5.25 a share. The firm plans to increase the annual…

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

Q: CEPS Group just paid an annual dividend of OMR 5.25 a share. The firm plans to increase the annual…

A: Click to see the answer

Q: Blue Co. just paid a P2 per share dividend on its common stock.  The dividend is expected to grow at…

A: Solution : Given Dividend paid (D0)           =P2 Growth rate                       =7% Current…

Q: Corn, Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and has…

A: Dividend this year D0 was = $6 Dividend in year 1, D1 = $6 + $2 = $8 Dividend in year 2, D2 = $8 +…

Q: Blossom Corp. paid a dividend of $2.00 yesterday. The company’s dividend is expected to grow at a…

A: As per dividend discount model, P0 = D1 /(ke -g) Where, P0 = market price D1 =D0*(1+g) i.e.…

Q: Balloons Inc normally pays a quarterly dividend. The last such dividend paid was $1.00, all future…

A: The question is based on the concept of valuation of stock by use of discounting of expected future…

Q: The Impulse Shopper recently paid an annual dividend of $1.13 per share. The company just announced…

A: In this, we have to calculate dividends and from that, we have to calculate the present value of the…

Q: DEF Company's current share price is $17 and it is expected to pay a $1.55 dividend per share next…

A: Cost of equity can be computed by the following formula, Re = (D1 / P0) + g Where, D1 = Dividends…

Q: Hudson Corporation will pay a dividend of $2.58 per share next year. The company pledges to increase…

A: Formulas: Current price = Expected dividend / (Required return - growth rate)

Q: Jarett & Sons's common stock currently trades at $32.00 a share. It is expected to pay an annual…

A: a. Cost of equity = (D1/share price)+ Dividend growth rate Cost of equity = ($1/$32) + 6% Cost of…

Q: Yesterday, Tobermory plc paid a £2 per share dividend. Its dividends are expected to grow steadily…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: A. Torch Industries can issue perpetual preferred stock at a price of $55.00 a share. The stock…

A: A combination of the long-term debts and different types of stocks to raise funds for the business…

Q: RST Ltd. Is currently selling common stock for $90 par share.  The firm expects to pay cash dividend…

A: Cost of common stock refers to minimum returns required to pay to its shareholders. In other words,…

Q: Eakins Inc.'s common stock currently sells for $55.00 per share, the company expects to earn $2.75…

A: First, dividend will be computed as follows:  Payout ratio * Earning per share…

Q: Fowler, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are expected to…

A: As per Dividend Growth model, P0 = D1 / (ke-g) Where,  D1 = Dividend for year 1 Ke = cost of equity…

Q: Coolibah Holdings is expected to pay dividends of $1.00 every six months for the next three years.…

A: Current Price = Present Value of Dividend + Present Value of price at the end of period

Q: Hudson Corporation will pay a dividend of $2.54 per share next year. The company pledges to increase…

A: Definition: Dividends: This is the amount of cash distributed to stockholders by a company out its…

Q: In response to the stock market's reaction to its dividend policy, the Nico's Toy Company has…

A: Current dividend=$3.25Growth rate=4%Required rate of interest=9%

Q: CEPS Group just paid an annual dividend of OMR 2.45 a share. The firm plans to increase the annual…

A: Formulas:

Q: CEPS Group just paid an annual dividend of OMR 2.45 a share. The firm plans to increase the annual…

A: Dividend paid just now (D0) = OMR 2.45 Dividend in Year 1 (D1) = OMR 2.45*(1+4%) = OMR 2.548…

Q: CEPS Group just paid an annual dividend of OMR 2.45 a share. The firm plans to increase the annual…

A: Formulas:

Q: CEPS Group just paid an annual dividend of OMR 1.45 per share. Today, the company announced that…

A: Formula: Current price = Expected dividend / ( Required return - growth rate)

Q: CEPS Group just paid an annual dividend of OMR 1.45 per share. Today, the company announced that…

A: Here, The current price of the stock is P0. The last dividend paid is D0. The required rate of…

Q: Coolibah Holdings is expected to pay dividends of $1.30 every six months for the next three years.…

A: A stock is a financial security issued by corporations to raise equity capital for a long-term…

Q: Java Coffee is preparing to pay its fırst dividend. It is going to pay $1, $1.5, and $1.75 a share…

A: Share worth = Dividend1 / ( 1 + Rate )1 + Dividend2 / ( 1 + Rate )2 + Dividend3 / ( 1 + Rate )3 +…

Q: Jarett & Sons's common stock currently trades at $33.00 a share. It is expected to pay an annual…

A: Given, P0 = $33 D1 =$1.25 g =5%

Q: The Stopperside Wardrobe Co. just paid a dividend of $1.45 per share on its stock. The dividends are…

A: Under dividend growth model, valuation of common stock is done by assuming that dividends keep…

Q: The Stopperside Wardrobe Co. just paid a dividend of $1.45 per share on its stock. The dividends are…

A: Given: Current dividend = $1.45 Growth rate = 6% Required return = 11%

Q: XYZ stock is currently selling for $89.78 per share. The company just paid its first annual dividend…

A: Given information: Market price of stock is $89.78 First dividend paid is $1.86, Dividend growth…

Q: Milford Masonry, Inc. expects to pay a dividend per share of $2.50 next year on its common stock.…

A: solution given Annual dividend expected $2.50 per share Required rate of return 10%…

Q: Carlysle Corporation has perpetual preferred stock outstanding that pays a constant annual dividend…

A: In the given question we need to compute the price of firm's perpetual preferred stock. Perpetual…

Q: EMKA corporation is going to pay a dividend of $1.5, $2, and $2.5 each year for the next three…

A: Here, Dividend in Year 1 is $1.5 Dividend in Year 2 is $2 Dividend in Year 3 is $2.5 Constant Growth…

Knowledge Booster
Finance
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.
Recommended textbooks for you
  • EBK CONTEMPORARY FINANCIAL MANAGEMENT
    Finance
    ISBN:9781337514835
    Author:MOYER
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    EBK CFIN
    Finance
    ISBN:9781337671743
    Author:BESLEY
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    Intermediate Financial Management (MindTap Course...
    Finance
    ISBN:9781337395083
    Author:Eugene F. Brigham, Phillip R. Daves
    Publisher:Cengage Learning
  • Financial Management: Theory & Practice
    Finance
    ISBN:9781337909730
    Author:Brigham
    Publisher:Cengage
    Corporate Fin Focused Approach
    Finance
    ISBN:9781285660516
    Author:EHRHARDT
    Publisher:Cengage
  • EBK CONTEMPORARY FINANCIAL MANAGEMENT
    Finance
    ISBN:9781337514835
    Author:MOYER
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    EBK CFIN
    Finance
    ISBN:9781337671743
    Author:BESLEY
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    Intermediate Financial Management (MindTap Course...
    Finance
    ISBN:9781337395083
    Author:Eugene F. Brigham, Phillip R. Daves
    Publisher:Cengage Learning
    Financial Management: Theory & Practice
    Finance
    ISBN:9781337909730
    Author:Brigham
    Publisher:Cengage
    Corporate Fin Focused Approach
    Finance
    ISBN:9781285660516
    Author:EHRHARDT
    Publisher:Cengage