Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 4, Problem 17PS
Two-stage DCF model Company Z-prime is like Z in Problem 10 in all respects save one: Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. What is Z-prime’s stock price? Assume next year’s EPS is $15.
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Company A is a worldwide delivery company that is expected to generate a dividend (per share) of $1.40 one year from now (i.e. at t=1). You are expecting that on average Company A's dividends will grow at 5% each year after that into the indefinite future. Assume for simplicity that all dividends are paid at the end of each year. Suppose that the appropriate discount rate for these dividends is 10%.
a. What is the current stock price for Company A? Assume that any dividend at t=0 has already been paid out.
b. What do you expect the stock price of Company A to be next year (i.e. at t=1) immediately after the dividend has been paid out?
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Franklin Corporation is expected to pay a dividend of $1.24 per share at the end of the year (D1 = $1.24). The stock sells for $32.40 per share, and its required rate of return is 7.2%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
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Please work out the problem do not use excel.
Company Z-prime's earnings and dividends per share are expected to grow by 3% a year. Its growth will stop after year 4. In year 5
and afterward, it will pay out all earnings as dividends. Assume next year's dividend is $9, the cost of equity is 13%, and next year's EPS
is $16. What is Z-prime's stock price?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Stock price
Chapter 4 Solutions
Principles of Corporate Finance
Ch. 4 - Stock markets True or false? a. The bid price is...Ch. 4 - Stock quotes a. I would like to sell 1000 shares...Ch. 4 - Stock quotes Here is a small part of the order...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Valuation by comparables Look up P/E and P/B...Ch. 4 - Dividend discount model True or false? a. All...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...
Ch. 4 - Prob. 11PSCh. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Prob. 13PSCh. 4 - Cost of equity capital Under what conditions does...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Two-stage DCF model Company Z-prime is like Z in...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - Growth opportunities If company Z (see Problem 10)...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Valuing a business Permian Partners (PP) produces...Ch. 4 - Valuing a business Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing a business Phoenix Corp. faltered in the...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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