The name of the company which has high stock price in current, next and upcoming years.

Question

Want to see the full answer?

Answer 1

Question

Chapter 31, Problem 2E

To determine

To find:

The name of the company which has high stock price in current, next and upcoming years.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. (a) What would you expect the price of the stock to be if it were priced according to its present value? (b) What happens to the price of the stock if the discount rate falls to 2%? (c) Now suppose you expect the dividend to grow by 1.5% every year, such that it will be $10.15 next vear. $10.30 the year after that, and so on. What are the new prices of the stock with 5% and 2% discount rates?

Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)

After careful analysis, you have determined that a firm’s dividends should grow at 15%, on average, in the foreseeable future. The firm’s last dividend was $1.5. Compute the current price of this stock, assuming the required return is 20%