Grateful Eight Co. is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the required return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Q: McCabe Corporation is expected to pay the following dividends over the next four years: $15, $11,…
A: given, D1=$15D2=$11D3= $9D4=$2.95g= 4%r=10.3%
Q: eliable Electric is a regulated public utility, and it is expected to provide steady dividend growth…
A: The Formula for stock price using the Dividend Discount Growth Model (DDM) is as follows:
Q: The next dividend payment by Savitz, Inc., will be $1.80 per share. The dividends are anticipated to…
A: Using Dividend Discount Model
Q: The newspaper reported last week that Tisch Enterprises earned $34.17 million this year. The report…
A: Calculation of Earnings Growth and Next Year’s Earnings:The earnings growth is 13.50%.
Q: Brookes Corporation has an expected dividend (D1) of $1.60, a current stock price (P0) of $40, and a…
A: The dividend discount model is used by investors to determine the price of stocks. The stocks are…
Q: Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next…
A: Value of share today =Present value of all dividends
Q: Sandhill, Inc., is a consumer products firm that is growing at a constant rate of 4.0 percent. The…
A: As per Dividend discount model value of stock is = Year1 dividend /(required rate - growth) year 1…
Q: Suppose Wacken, Limited, just issued a dividend of $1.52 per share on its common stock. The company…
A: Let D(-4) = Dividend 4 years ago = $1.2 D(-3) = $1.26 D(-2) = $1.33 D(-1) = $1.44 D0 = $1.52 Let g =…
Q: Eastern Electric currently pays a dividend of $1.64 per share and sells for $27 a share. a. If…
A:
Q: Suppose you know that a company’s stock currently sells for $54 per share and the required return on…
A: Current Stock price =$54 Required return = 9% Capital gain and dividend yield are equal Then,…
Q: Cape Corp. will pay a dividend of $3.50 next year. The company has stated that it will maintain a…
A: Introduction: Dividends: Dividends are the returns paid by the company for the investors, for…
Q: Synovec Corporation is expected to pay the following dividends over the next four years: $5.70,…
A: Current share price is the present value of the future payments at a given required rate of return.
Q: The Triblani Company Just Issued a dividend of $2.95 per share on its common stock. The company is…
A: Cost of capital:- It represents the return of a company that needs to achieve in order to verify…
Q: Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the…
A: A model that helps to evaluate the value of the stock by discounting the dividend earned on the…
Q: Reliable Electric is a regulated public utility, and it is expected to provide steady dividend…
A: As per the Gorden model, Cost of equity = [ ( D1 / P0 ) + g ] where, D1 = Current Dividend * ( 1 +…
Q: Caccamise Company is expected to maintain a constant 3.4 percent growth rate in its dividends…
A: Required rate of return refers to the rate which an investor seeks to get for bearing the risk on…
Q: Redan, Inc., is expected to maintain a constant 5.4 percent growth rate in its dividends,…
A:
Q: SG Ltd. has historically paid a dividend of $2.50 to its shareholders semi-annually. The company has…
A:
Q: Suppose that a firm’s recent earnings per share and dividend per share are $2.60 and $1.60,…
A: Calculate the dividend over the next five years as follows:
Q: Lohn Corporation is expected to pay the following dividends over the next four years: $10, $6, $5,…
A: Current stock price is the value of stock today at which it can be sold in the market.
Q: he Foreman Company’s earnings and common stock dividends have been growing at an annual rate of 5…
A: Using dividend discounting model, we can find the value of the share at present. This method is used…
Q: Grateful Eight Co. is expected to maintain a constant 4 percent growth rate in its dividends…
A: Given: dividend yield = 5.8% growth rate of dividends in perpetuity = 4% Gordon growth model states…
Q: Suppose Stark Ltd. just issued a dividend of $2.08 per share on its common stock. The company paid…
A: Workings: Formula: Growth rate = ( Current year dividend - previous year dividend ) / previous year…
Q: The Tribiani Company just issued a dividend of $2.90 per share on its common stock. The company is…
A: Given: Current dividend = $2.90 Price = $56 Growth rate = 4.5%
Q: Digital Industries paid a dividend of $2.00 per share of stock recently and expects to grow the…
A: Let Dn be the dividend in year n. D0 = $2 Growth rate (g) = 3% r = 7%
Q: Sidman Products's common stock currently sells for $49 a share. The firm is expected to earn $4.41…
A: Given; Current market price = $49 Expected earnings per share = $4.41 Year end dividend = $2.80
Q: The next dividend payment by Grenier, Inc., will be $1.72 per share. The dividends are anticipated…
A: The interest rate that an investor expects from the investment made is known as required rate of…
Q: Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 31 percent for the…
A: Current dividend = $1.75 Required return = 12% Future dividends Year Last dividend Growth rate…
Q: The next dividend payment by Savitz, Inc., will be $1.64 per share. The dividends are anticipated to…
A: Next dividend = $ 1.64 Growth rate = 8% Current price = $ 31
Q: Grateful Eight Co. is expected to maintain a constant 6.4 percent growth rate in its dividends…
A: Dividend Yield shows returns received as dividend in relation to stock price and same is computed by…
Q: XYZ Corp is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next…
A: The value of a share can be calculated by use of the dividend discounting model. Gordan constant…
Q: O'Leary, Inc., is expected to maintain a constant 5.2 percent growth rate in its dividend…
A: Required rate of return on the stock is the sum of the company’s dividend yield and capital gains…
Q: Suppose you know that a company's stock currently sells for $53.47 per share and the required return…
A: It is mentioned in the question that total return is equal divided into capital gain yield and…
Q: Reliable Electric is a regulated public utility, and it is expected to provide steady dividend…
A: Dividend discount model is the method used to value the price of the stock based on thoery that the…
Q: eliable Electric is a regulated public utility, and it is expected to provide steady dividend growth…
A: Using Dividend Discount Model
Q: A7X Corp. just paid a dividend of $2.00 per share. The dividends are expected to grow at 23 percent…
A: Formulas:
Q: If the required return on the stock is 10 percent, what is the current share price?
A: Share price: It represents the current market value to buyers and sellers. The price of a share can…
Q: suppose wacken, limited, just issued a dividend of $2.73 per share on its common stock. the company…
A: Data given: Year Dividend $ 1 2.31 2 2.39 3 2.48 4…
Q: Barton Industries expects next year's annual dividend, D1, to be $2.30 and it expects dividends to…
A: a) Computation of cost of equity without floatation adjustment and cost of new equity:
Q: he newspaper reported last week that Tisch Enterprises earned $34.17 million this year. The report…
A: Hi, as per our policy we will answer the first three parts. Kindly repost the remaining parts…
Q: The next dividend payment by Hoffman, Inc., will be $2.75 per share. The dividends are anticipated…
A: The stock price which is the maximum price to be paid for share consists of dividends and terminal…
Q: The next dividend payment by Savitz, Inc., will be $1.76 per share. The dividends are anticipated to…
A: Annual dividend yield is the dividend return on share price in the form of percentage. Given:…
Q: The next dividend payment by Savitz, Inc., will be $1.96 per share. The dividends are anticipated to…
A: Required Return is minimum return that an investor wanted from investment considering various risk…
Q: Suppose Wacken, Limited, just issued a dividend of $2.59 per share on its common stock. The company…
A:
Q: Cape Corp. will pay a dividend of $2.70 next year. The company has stated that it will maintain a…
A: Stock value = Dividend next year/(Required rate - Growth rate)
Q: The Foreman Company’s earnings and common stock dividends have been growing at an annual rate of 5…
A: Answer - a. 10 percent Po = D1/(ke - g) g = 0.05 Do = $5 ke = 0.10 Dl = Do(1 + g) = 5(1 + .05) =…
Q: Could I Industries just paid a dividend of $1.45 per share. The dividends are expected to grow at a…
A: Stock price is defined as the maximum price that an investor is ready to pay for a stock. It is…
Q: Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the…
A: Current Share Price = [ Dividend 1 / ( 1 + Required rate ) ] + [ Dividend 2 / ( 1 + Required rate )2…
Q: Redan, Inc., is expected to maintain a constant 6.05 percent growth rate in its dividends,…
A: Required return of company = Growth rate of dividend + Dividend yield
Q: Suppose Wacken, Limited, just issued a dividend of $2.73 per share on its common stock. The company…
A: The formula used is shown: Here, Re is the cost of equity g is the growth rate
How can I calculate using excel? (see screenshot)
Given information:
Constant growth rate in dividends is 5%
Dividend yield is 6.8%
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
- Problem 10.16 projected financial statements for Walmart for Years +1 through +5. The following data for Walmart include the actual amounts for 2012 and the projected amounts for Years +1 through +5 for comprehensive income and common shareholders equity, assuming it will use implied dividends as the financial flexible account to balance the balance sheet (amounts in millions). Assume that the market equity beta for Walmart at the end of 2012 was 1.00. Assume that the risk-free interest rate was 3.0% and the market risk premium was 6.0%. Also assume that Walmart had 3,314 million shares outstanding at the end of 2012, and share price was 69.09. REQUIRED a. Use the CAPM to compute the required rate of return on common equity capital for Walmart. b. Compute the weighted-average cost of capital for Walmart as of the start of Year +1. At the end of 2012, Walmart had 48,222 million in outstanding interest-bearing debt on the balance sheet and no preferred stock. Assume that the balance sheet value of Walmarts debt is approximately equal to the market value of the debt. Assume that at the start of Year +1, it will incur interest expense of 4.2% on debt capital and that its average tax rate will be 32.0%. Walmart also had 5,395 million in equity capital from noncontrolling interests. Assume that this equity capital carries a 15.0% required rate of return. (For our forecasts, we assume noncontrolling interests are similar to preferred shares and receive dividends equal to the required rate of return each year.) c. Use the clean surplus accounting approach to derive the projected dividends for common shareholders for Years +1 through +5 based on the projected comprehensive income and shareholders equity amounts. (Throughout this problem, you can ignore dividends to noncontrolling interests.) d. Use the clean surplus accounting approach to project the continuing dividend to common shareholders in Year +6. Assume that the steady-state long-run growth rate will be 3% in Years +6 and beyond. e. Using the required rate of return on common equity from Requirement a as a discount rate, compute the sum of the present value of dividends to common shareholders for Walmart for Years +1 through +5. f. Using the required rate of return on common equity from Requirement a as a discount rate and the long-run growth rate from Requirement d, compute the continuing value of Walmart as of the beginning of Year +6 based on its continuing dividends in Years +6 and beyond. After computing continuing value, bring continuing value back to present value at the start of Year +1. g. Compute the value of a share of Walmart common stock, as follows: (1) Compute the sum of the present value of dividends including the present value of continuing value. (2) Adjust the sum of the present value using the midyear discounting adjustment factor. (3) Compute the per-share value estimate. h. Using the same set of forecast assumptions as before, recompute the value of Walmart shares under two alternative scenarios. To quantify the sensitivity of your share value estimate for Walmart to these variations in growth and discount rates, compare (in percentage terms) your value estimates under these two scenarios with your value estimate from Requirement g. Scenario 1: Assume that Walmarts long-run growth will be 2%, not 3% as before, and assume that its required rate of return on equity is 1 percentage point higher than the rate you computed using the CAPM in Requirement a. Scenario 2: Assume that Walmarts long-run growth will be 4%, not 3% as before, and assume that its required rate of return on equity is 1 percentage point lower than the rate you computed using the CAPM in Requirement a. i. What reasonable range of share values would you expect for Walmart common stock? Where is the current price for Walmart shares relative to this range? What do you recommend?16.H-Model (LO2, CFA6) The dividend for Should I, Inc., is currently $1.25 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years. If you require a 15 percent return on the stock, what is the most you would pay per share?Problem 8-14 Non-Constant Growth (LO1) Foxtrap Bearings Inc. is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per-share dividend in ten years and will increase the dividend by 5% per year thereafter. If the required return on this stock is 13.5%, what is the current share price? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current share price $
- Problem 11-16 Scenario Analysis (LO3) The common stock of Escapist Films sells for $25 a share and offers the following payoffs next year: Dividend Stock Price Boom $ 0 $ 18 Normal economy 1 26 Recession 3 34 The common stock of Leaning Tower of Pita Inc. is selling for $80 and offers these payoffs next year: Dividend Stock Price Boom $ 8 $ 240 Normal economy 4 90 Recession 0 0 Required: b-2. Calculate the expected rate of return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita. All three economic scenarios are equally likely to occur.Q. 17 Lumen Inc. is expected to have an earnings per share next year equal to $4.00 and is forecast to have a dividend payout ratio of 75% in perpetuity. The company is also forecast to have an ROE of 12%. The current market price per share is $10 which also happens to equal the current intrinsic value of equity per share, i.e., the market price is efficient. What must be the discount rate in order for the intrinsic equity value per share to equal to market price per share? Options - 43% 13% 33% 23%Q 20) Advertise-In-Print Ltd. currently has an earnings growth rate of -15%, i.e., their earnings are declining at the rate of 15% per year. This rate of earnings decline is expected to stay constant henceforth. Advertise-In-Print Ltd.'s next year's dividend per share is expected to be equal to $1.00 and their cost of equity is 10%. What is the intrinsic value of one share of stock in Advertise-In-Print Ltd. equal to? Options - $4 $10 $6.67 $20
- Ch. 9. The next dividend payment by Skippy Jon Jon, Inc., will be $1.08 per share. The dividends are anticipated to maintain a growth rate of 4 percent, forever. The stock currently sells for $24 per share. What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) Format as a percentage as "X.X"Problem 12-1 Calculating Cost of Equity [LO 1] The Tribiani Company just issued a dividend of $2.40 per share on its common stock. The company is expected to maintain a constant 8 percent growth rate in its dividends indefinitely. If the stock sells for $44.20 a share, what is the company’s cost of equity? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.9:13MM. kuldeepkumar 4Gl : Just now Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 7.2 percent, thereafter. If the required return is 14 percent and the company just paid a dividend of $3.35, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Share price <
- 1. Problem 9.02 (Constant Growth Valuation) Tresnan Brothers is expected to pay a \$3.30 per share dividend at the end of the year(1.e.D1=53.20). The dividend is expected to grow at a constant rate of 94 a year. The required rate of tetura on the stock,fmis16%. What is the stock's current value per share? Round vour answer to the nearest cent.9.2. Stock Values The next dividend payment by Skippy, Inc., will be $2.95 per share. The dividends are anticipated to maintain a growth rate of 4.8 percent, forever. If the stock currently sells for $53.10 per share, what is the required return?Problem 9-10Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per year in the future. Shelby's common stock sells for $29.75 per share, its last dividend was $2.00, and the company will pay a dividend of $2.06 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 0.6, the risk-free rate is 4%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 12%, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range.) % On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each…