Fundamentals Of Financial Manageme...

10th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337902571



Fundamentals Of Financial Manageme...

10th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337902571
Chapter 9, Problem 3P
Textbook Problem

CONSTANT GROWTH VALUATION Holtzman Clothiers’s stock currently sells for $38.00 a share. It just paid a dividend of $2.00 a share (i.e., D0 = $2.00). The dividend is expected to grow at a constant rate of 5% a year. What stock price is expected 1 year from now? What is the required rate of return?

Summary Introduction

To determine: The expected stock price after 1 year from now and the required rate of return.


Dividends per Share: The periodic rewards that are received by the stockholders for their investment in a company are known as dividends. It is also a measure based on per share. Per share, calculation of dividends is called as the dividends per share.

Explanation of Solution

Compute next year expected price, ( P1 ).


Current stock price ( P0 ) is $38 per share.

Growth rate (g) is 5% or 0.05.

The formula to calculate next expected price is,



  • P0 is the current  stock price.
  • g is the growth rate.
  • P1 is the next expected price.

Substitute, $38 for P0 and 0.05 for g


The expected price of the stock for the next year is $39.9.

Compute the required rate of return.


Current stock price ( P0 ) is $38 per share.

Growth rate (g) is 5% or 0.05.

Current dividend paid ( D0 ) is $2

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Chapter 9 Solutions

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
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Ch. 9 - Discuss the similarities and differences between...Ch. 9 - This chapter discusses the discounted dividend and...Ch. 9 - How do non-operating assets impact a firms...Ch. 9 - DPS CALCULATION Weston Corporation just paid a...Ch. 9 - CONSTANT GROWTH VALUATION Tresnan Brothers is...Ch. 9 - CONSTANT GROWTH VALUATION Holtzman Clothierss...Ch. 9 - NONCONSTANT GROWTH VALUATION Holt Enterprises...Ch. 9 - CORPORATE VALUATION Scampini Technologies is...Ch. 9 - PREFERRED STOCK VALUATION Farley Inc. has...Ch. 9 - PREFERRED STOCK RATE OF RETURN What will be the...Ch. 9 - PREFERRED STOCK VALUATION Earley Corporation...Ch. 9 - PREFERRED STOCK RETURNS Avondale Aeronautics has...Ch. 9 - VALUATION OF A DECLINING GROWTH STOCK Maxwell...Ch. 9 - Suppose you believe that the economy is just...Ch. 9 - VALUATION OF A CONSTANT GROWTH STOCK Investors...Ch. 9 - CONSTANT GROWTH You are considering an investment...Ch. 9 - NONCONSTANT GROWTH Computech Corporation is...Ch. 9 - CORPORATE VALUATION Dantzler Corporation is a...Ch. 9 - NONCONSTANT GROWTH Carnes Cosmetics Co.s stock...Ch. 9 - CONSTANT GROWTH Your broker offers to sell you...Ch. 9 - NONCONSTANT GROWTH STOCK VALUATION Taussig...Ch. 9 - CORPORATE VALUATION Brandtly Industries invests a...Ch. 9 - CORPORATE VALUE MODEL Assume that today is...Ch. 9 - NONCONSTANT GROWTH Assume that it is now January...Ch. 9 - Comprehensive/Spreadsheet Problem NONCONSTANT...Ch. 9 - STOCK VALUATION Robert Balik and Carol Kiefer are...Ch. 9 - For purposes of this exercise, lets take a closer...Ch. 9 - Check recent headlines on the website to see the...Ch. 9 - To provide a starting point for gauging a companys...Ch. 9 - To put XOMs P/E ratio in perspective, it is useful...Ch. 9 - In the text, we discussed using the discounted...Ch. 9 - The required return on equity, rs, is the final...Ch. 9 - It is often useful to perform a sensitivity...Ch. 9 - Until now, we have assumed that XOMs dividend will...Ch. 9 - Finally, you can also use the information on the...

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