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Unformatted text preview: = Div1/1+k + Div2/(l+k)2 + Div3/(1+k)3 + Div4/(1+k)4 + Tennina1Va1ue/(1 +k)4 = Va1ue(year 0) = 2.24/1 +.1 + 2.52/(1 +.1)2 + 2.73/(1 +.1)3 + 59.61/(1 +.1)4 = $46.88 7.19 Comprehensive Problem • XYZ stock currently sells for $50 per share. The next expected annual dividend is $2, and the growth rate is 6%. What is the expected rate of return on this stock? • If the required rate of return on this stock were 12%, what would the stock price be, and what would the dividend yield be? B31 Expected return = 2/50 + .06 = .10 Price = 2/ (.12  .06) = $33.33 Dividend yield = 2/33.33 = 6% 7.31...
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 Fall '08
 WHITE
 Corporate Finance, Stock Valuation, Valuation, Dividend, Dividend yield, Maxima Machinery

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