HomeworkLib
Question

Header​ Motor, Inc., paid a ​$ 3.92 3.92 dividend last year. At a constant growth rate...

Header​ Motor, Inc., paid a ​$ 3.92 3.92 dividend last year. At a constant growth rate of 6 6 ​percent, what is the value of the common stock if the investors require a 8 8 percent rate of​ return? The value of the common stock is ​$ nothing . ​(Round to the nearest​ cent.)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate)
Price = 3.92 * (1+0.066) / (0.088 - 0.066)
Price = 189.94
0 0
Add a comment
Know the answer?
Add Answer to:
Header​ Motor, Inc., paid a ​$ 3.92 3.92 dividend last year. At a constant growth rate...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • vuormal ) Question Help (Related to Checkpoint 10.1) (Common stock valuation) Header Motor, Inc., paid a $3.92 divid...

    vuormal ) Question Help (Related to Checkpoint 10.1) (Common stock valuation) Header Motor, Inc., paid a $3.92 dividend last year. At a constant growth rate of 6 percent, what is the value of the common stock if the investors require a 8 percent rate of return? The value of the common stock is S (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer

  • Header Motor, Inc, paid a $3.04 dividend last year. At a constant growth rate of 4...

    Header Motor, Inc, paid a $3.04 dividend last year. At a constant growth rate of 4 percent, what is the value of the common stock if the investors require a 12 percent rate of return?.

  • Herrera Motor Inc. paid a ​$2.75 dividend last year. At a constant growth rate of 3...

    Herrera Motor Inc. paid a ​$2.75 dividend last year. At a constant growth rate of 3 ​percent, what is the value of the common stock if the investors require a rate of return of 19 ​percent?

  • Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%,...

    Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%, what is the value of the common stock if the investors require a rate of return of 18%?

  • please show work and help with all three questions (Related to Checkpoint 10.1) (Common stock valuation)...

    please show work and help with all three questions (Related to Checkpoint 10.1) (Common stock valuation) Header Motor, Inc., paid a $3.43 dividend last year. At a constant growth rate of 3 percent, what is the value of the common stock if the investors require a 8 percent rate of retum? $(Round to the nearest cent) The value of the common stock is (Common stock valuation) Gilland Motor, Inc., paid a $4.08 dividend last year. If Gilliland's return on equity...

  • 1. The last dividend paid by Corporation was $1.00. Corporation’s growth rate is expected to be...

    1. The last dividend paid by Corporation was $1.00. Corporation’s growth rate is expected to be 5 percent forever. Corporation’s required rate of return on equity is 12 percent. What is the current price of Corporation’s common stock? 2.  Corporation has paid a $1.00 dividend every year on its preferred stock since its inception in 1967. Investors demand a 7 percent required return on the stock. What should Corporation’s stock trade for in the market? 3.  The last dividend paid by Corporation...

  • TUV Inc., just paid a dividend of $4.5 per share on its stock. The growth rate...

    TUV Inc., just paid a dividend of $4.5 per share on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require an 20 percent return on the stock for the first three years, then a 12 percent return for the next three years, and then an 9 percent return thereafter. What is the current share price? Answer to two decimals, carry intermediate calcs. to four decimals.

  • Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $2.00. It expects to...

    Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $2.00. It expects to grow at a constant rate of 2% per year. If investors require a 8% return on equity, what is the current price of Hubbard's common stock? Round your answer to the nearest cent. Do not round intermediate calculations. Quantitative Problem 2: Carlysle Corporation has perpetual preferred stock outstanding that pays a constant annual dividend of $1.30 at the end of each year. If investors...

  • Your company paid a dividend of $3.00 last year (DO =3.0). The growth rate is expected...

    Your company paid a dividend of $3.00 last year (DO =3.0). The growth rate is expected to be 10 percent for first year, 8 percent the second year, then 7 percent for the third year, and then the growth rate is expected to be a constant 6 percent thereafter. The required rate of return on equity (rs) is 10 percent. What is the company's current stock price (i.e., intrinsic value)? 0 $79.94 O $84.74 0 $73.32 O $67.47 $101.06

  • Stock Valuation Bretton, Inc., just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to...

    Stock Valuation Bretton, Inc., just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year, indefinitely. Investors require a 15 percent return on the stock for the first three years, a 13 percent return for the next three years, and then an 11 percent return thereafter. What is the current share price for the stock?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT