Your company has the following expected dividends over the next 6 years: $2.00, $2.40, $3.20,$3.60, $4.20, and $4.41. Note that starting in Year 5, dividends will begin to grow at a constant,long-run sustainable growth rate of 5 percent (D6 = $4.20 x 1.05= $4.41, etc.). Further, the risk-freerate is 4.0 percent, the Risk Premium on the Market is 6.0 percent, and the company has a beta of1.30.Calculate the current price of this stock at Year 0.O $43.75$40.27$52.72O $47.84O $37.29

The required return rate on the stock will be used for finding the current worth of the stock which…

Answered: Your company has the following expected…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 23P

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Management has recently announced that expected dividends for the next four years will be as follows: Year Dividend 1 GH¢2.50 2 GH¢3.25 3 4 GH¢4.00 GH¢5.00 For the subsequent years, management expects the dividend to grow at 6 percent annually. If the risk-free rate is 7.5 percent, the return on the market is 13.5 percent, and the firm's beta is 1.6, what is the maximum price that you should pay for this stock?
Crane Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 6 percent. If the required rate of return is 15.50 percent, what is the current value of the stock?
YZ Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 17% during the next 2 years, at 15% the following year, and at a constant rate of 7% during Year 4 and thereafter. Its last dividend was $1.55, and its required rate of return is 12%. a. Calculate the value of the stock today. b. Calculate P1 and P2 (Prices for Year 1 and Year 2). c. Calculate the dividend and capital gains yields for Years 1, 2, and 3.
Management has recently announced that expected dividends for the next three years will be as follows: YEAR DIVIDEND 1 1.2 2 1.6 3 2.5 After year 3, dividends are expected to grow at the rate of 3.5% per year. An appropriate required return for the stock is 13%. What should be the stock worth today?
you are forecasting future free cash flows as part of your effort to value a stock. You believe the Year six free cash flows will be $1 million, that the growth rate after Year 6 will be 3%, and that the required rate of return on equity for this stock is 8%. Compute the value today of this “continuing value”, assuming constant growth. Note that the present value factor for a dollar to be received at the end of year 6 is 0.63 and the present value of a dollar received at the end of year five is 0.68, when the discount rate is 8%.
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You are interested in determining the intrinsic value of Hoffman Inc. Your analysis shows that the firm’s growth rate will drop from its current pace by 20% each of the next two years, and then you estimate that dividends will continue to grow at the year 2 rate, with the same dividend policy in place, indefinitely. Lastly, your estimate of the required return on the firm’s equity is 12%. Hoffman’s recently published annual report shows the following financial relationships: Assets = 1.4 x Equity Current Assets = 1.7 x Current Liabilities Sales = 1.5 x Assets Net Income = 8% x Sales Dividends = 30% x Net Income Earnings per share (Basic) = $0.80 per share Required: Use the multi-period DDM to estimate the intrinsic value of the company’s stock now, at the beginning of year 1.
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Please answer this question with rapid speed within 10 Mins, I promise will give you 100 % rating. SDL Corp.’s growth rate is expected to stand at 40% for the next two years, then to decline to a sustainable growth rate of 5%. If the most recent dividend paid is $2.00 and required rate of return is 15%, what is its stock worth today? Based on the calculated stock worth, what are its expected dividend yield and capital gains during the first year & second year?
The dividends and earnings of Company ABC are expected to grow as follows: - 20 percent a year for the next 10 years - 15 percent growth for another five years - 3 percent (constantly) after the 15 years The risk-free rate is 5 percent and the expected return on the market is 10 percent. The Beta for Company ABC is 0.8 , and its current dividend is $1.55. Calculate the price of the stock at the beginning of Year 15

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