Question

Asked Oct 17, 2019

XYZ company has just paid a dividend of $1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future.

- Calculate the current stock value using the Gordon Constant growth model.
- Evaluate Gordons growth model focusing on its limitations and why in certain situations this growth model will create incorrect results?

Step 1

**1.**

**Calculation of Current Stock Value:**

The current stock value is **$21.30**.

Tagged in

Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a fa...

A: The issue price of the bond can be determined using its face value, coupon payment, yield to maturit...

Q: Problem 2-13 Statement of Retained Earnings (LG2-1) Mr. Husker’s Tuxedos Corp. began the year 2018 ...

A: Prepared Statement of Retained Earnings using excel:

Q: Evaluating Annie Hegg's Proposed Investment in Atilier Industries Bonds Annie Hegg has been con...

A: Part d:With increase in inflation rate, the rate will also increase by 1%. The inflation adjusted re...

Q: The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value...

A: Calculate the free cash flows as follows:

Q: Common stock value: Constant growth Seagate Technology is a global leader in data storage solutions...

A: D2015 = 1.49; D2019 = 2.51;g = the future constant annual dividend growth rate = the historical annu...

Q: The following graph shows the value of a stock's dividends over time. The stock's current dividend i...

A: Calculate the future value and present value for expected dividends as follows:

Q: The XYZ Company paid $1.25 dividend yesterday. Its dividend growth rate is expected to be constant a...

A: Current price of stock will consist present value of all future dividend.The below expression will h...

Q: If you have a $125,000 mortgage with a $700.00 monthly payment, payable over 30 years, what interest...

A: Calculation of Interest Rate:The interest rate is 5.38%.Excel Spreadsheet:

Q: With a 28% marginal tax rate, would a tax free yield of 7% or taxable yeild of 9.5% give you a bett...

A: Hence, effective yield of 9.5% taxable yield is 6.84%.The effective yield of 9.5% taxable yield is c...