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a firm recently paid a $0.30 annual dividend. The dividend is expected to increase by 11 percent in each of the next four years. In the fourth year,...

This question was answered on Jul 20, 2016. View the Answer

1.  a firm recently paid a $0.30 annual dividend.  The dividend is expected to increase by 11 percent in each of the next four years.  In the fourth year, the stock price expected to be $14.  If there required return for this stock is 14.5 percent, what is its current value?  (Do not round intermediate calculations, round final answer to 2 decimal places.)  Please show work


2.  consider a firm that had been priced using a 12.5 percent growth rate and a 14.5 percent required return.  the firm recently paid a $2.45 dividend.  the firm has just announced that because of a new joint venture, it will likely grow at a 13.0 percent rate.  How much should the stock price change (in dollars and percentage)?     What will is the change in stock price?       What is the change in stock percent?       (Do not round intermediate calculations, round your final answer to 2 decimal places.)  show work.

3.  Suppose that a firm's recent earnings per share and dividend per share are #3.40 and $3.10, respectively.  Both are expected to grow at 8 percent.  However, the firm's current P/E ratio of 32 seems high for this growth rate.  The P/E ratio is expected to fall to 28 within five years.  Compute the dividends over the next five years. (Do not round intermediate calculations and round final answers to 3 decimal place.  Dividends _________,  First year_______, Second year______, Third year_______, fourth year________ Fifth year _________.        Compute the value of this stock price in five years.  (Do not round intermediate calculations and round your final answer to 2 decimal places.)  Stock price __________.      Calculate the present value of these cash flows using a 10 percent discount rate.  (Do not round intermediate calculations and round your final answer to 2 decimal place.)   Present value __________




Top Answer

1.  D1 = $0.3*1.11 = $0.333 D2 = $0.333*1.11 = $0.36963 D3 = $0.36963*1.11 = $0.4102893 P0... View the full answer

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Stock Price - Dividend Discount Model.docx

1. a firm recently paid a $0.30 annual dividend. The dividend is expected to increase by 11 percent
in each of the next four years. In the fourth year, the stock price expected to be $14. If there...

This question was asked on Jul 20, 2016 and answered on Jul 20, 2016.

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