1) ABC Corp is expected to pay a dividend of $7.00 next year. Due to strong...

Question

Question

business finance

Answer 1

Answer #1

	Required rate=	10.00%
Year	Previous year dividend	Dividend growth rate	Dividend current year	Horizon value	Total Value	Discount factor	Discounted value
1	0	0.00%	7		7	1.1	6.3636
2	7	50.00%	10.5		10.5	1.21	8.67769
3	10.5	30.00%	13.65	200.85	214.5	1.331	161.15702
	Long term growth rate (given)=	3.00%			*Value of Stock =*	*Sum of discounted value =*	176.2

Where
Current dividend =Previous year dividend*(1+growth rate)^corresponding year
Unless dividend for the year provided
Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 3 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

Answer 2

Similar Homework Help Questions

ABC Corp. will pay a dividend (at time 1) of $3.60. It is expected the company...

ABC Corp. will pay a dividend (at time 1) of $3.60. It is expected the company will increase its dividend by 1% per year forever. If the ABC Corp.'s equity cost of capital is 11%, what is the price of its stock at time 3? Use the formula. The answer is $37.09, but how can I figure this out with the formula and not a table.
Company ABC is expected to pay $1.5 dividend next year. The dividend will then grow by...

Company ABC is expected to pay $1.5 dividend next year. The dividend will then grow by 10% for another three years. After that, the dividend will be constant forever. How much would you like to pay for this stock if your required rate of return is 15%?
ABC Company is not expected to pay any dividends for the next 3 years. Beginning 4...

ABC Company is not expected to pay any dividends for the next 3 years. Beginning 4 years from today, investors expect to receive a dividend of $2 per share for 3 years and then a dividend of $3 per share for each of the next 4 years. Then dividends are expected to grow at 4% per year forever. If investors require a 15% return, what is the price per share? Do not use excel. Need to understand this writing out...

Dynasty Corp. will pay a $3 dividend in one year. If investors expect that dividend to...

Dynasty Corp. will pay a $3 dividend in one year. If investors expect that dividend to remain constant forever, and they require a 10% return on Dynasty stock, what is the stock worth? What is the stock worth if investors expect Dynasty’s dividends to grow at 3% per year?
Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the...

Microsoft Corp. will pay a dividend of $2.04 per share next year. Investors anticipate that the annual dividends will grow by 2% per year forever, and they require an 12% discount rate. Calculate the value of the stock.
The next year the common stock of Gold Corp. will pay a dividend of $4.01 per...

The next year the common stock of Gold Corp. will pay a dividend of $4.01 per share. If the company is growing at a rate of 4.84 percent per year, and your required rate of return is 10.13 percent, what is Gold's company stock worth to you?

The Miller Corp. will pay an annual dividend of $1.50 one year from now. Analysts expect...

The Miller Corp. will pay an annual dividend of $1.50 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the 3rd year. After then, growth will level off at 4% per year forever. What is the value of its stock today if the firm’s required return is 20%?
QUESTION 25 ABC Inc. will pay a $2.00 dividend next year. It will pay a $3.00...

QUESTION 25 ABC Inc. will pay a $2.00 dividend next year. It will pay a $3.00 the year after. Following this dividends will grow at an average annual rate of 8% per year forever. Assuming a 12% discount rate what is the current price of the stock? 581 $68.75 $66.96 $82.79 Click Save and Submit to tae and rubmit. Click Save All Annars to sell ansors Save Al Answers Close Wind
Alexander corp. will pay a dividend of $2.90 next year. The company has stated that it...

Alexander corp. will pay a dividend of $2.90 next year. The company has stated that it will maintain a constant growth rate of 5.25 percent a year forever. If you want a return of 18 percent, how much will you pay for the stock?

ABC, Inc. is expected to pay a dividend of $8.19 next year. The dividends are expected...

ABC, Inc. is expected to pay a dividend of $8.19 next year. The dividends are expected to grow at 2.38% each year forever. The required rate of return on the stock is 13.05%. What is today's price of the stock? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.