market capitalization.) (Do not rouna intermeaiate caicuiations. Rouna your answer to 2 decimai piaces.) Current stock price b. Now Surf & Turf's CFO announces a switch from repurchases to a regular cash dividend. Next year's dividend will be $4.20 per share. The CFO reassurks investors that the company will continue to pay out 50% of earnings and reinvest 50%. All future payouts will come as dividends, however. What would be Surf & Turf 's stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price < Prev 19 of 23 Next > Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year's earnings are forecasted at $84 million. There are 10 million outstanding shares. The company has traditionally paid out 50% of earnings by repurchases and reinvested the remaining earnings. With reinvestment, the company has generated steady growth averaging 5% per year. Assume the cost of equity is 12%. a. Calculate Surf & Turf 's current stock price, using the constant-growth DCF model. (Hint. Take the easy route and estimate overall market capitalization.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current stock price b. Now Surf & Turf's CFO announces a switch from repurchases to a regular cash dividend. Next year's dividend will be $4.20 per share. The CFO reassures investors that the company will continue to pay out 50% of earnings and reinvest 50%. All future payouts will come as dividends, however. What would be Surf & Turf 's stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) < Prev 19 of 23 Next >
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Dividend:
It is the portion of the profit distributed to the shareholders when the company performs well.
Share Repurchase:
Also known as buyback, is done when a company decides to repurchase/buy back its own shares from the market. One of the reasons share purchase is done is so that the company value increases or when the company has idle cash on hand.
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