ABC Corporation just paid an annual dividend of $0.75. Analysts expect this dividend to grow at...
ABC Corporation just paid an annual dividend of $0.75. Analysts expect this dividend to grow at 10% in 2018, 8% in 2019, 5% in 2020, and then maintain a constant growth rate of 2%. If the expected cost of capital is 7% what is the present value of the stock?
Homework Answers
Dividend in year 2018=0.75*(1+10%)=0.825
Dividend in year 2019=0.825*(1+8%)=0.891
Dividend in year 2020=0.891*(1+5%)=0.93555
Terminal value=(Dividend in year 2020)*(1+Constant growth
rate)/(Cost of capital - Constant growth rate)
=(0.93555)*(1+2%)/(7% - 2%)=19.08522
Now, we need to discount the values using the cost of
capital
Present
value=0.825/(1+7%)^1+0.891/(1+7%)^2+0.93555/(1+7%)^3+19.08522/(1+7%)^3
=0.771028037+0.778233907+0.763687479+15.57922457
Present value=$17.89
Add Answer to:
ABC Corporation just paid an annual dividend of $0.75. Analysts
expect this dividend to grow at...
Assume Highline Company has just paid an annual dividend of $ 1.06 Analysts are predicting an...
Assume Highline Company has just paid an annual dividend of $ 1.06 Analysts are predicting an 10.7 % per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 4.7 % per year. If Highline's equity cost of capital is 9.3 % per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of...
Assume Highline Company has just paid an annual dividend of $ 1.03. Analysts are predicting an...
Assume Highline Company has just paid an annual dividend of $ 1.03. Analysts are predicting an 11.6 % per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 4.9 % per year. If Highline's equity cost of capital is 8.6 % per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of...
The ABC Company paid a dividend of 4.25 per share. Analysts expect the dividends to grow...
The ABC Company paid a dividend of 4.25 per share. Analysts expect the dividends to grow at the rate of 18% per year for 2 years, and then drop to 15% for 1 year, before finally converging to the industry median growth rate of 8% per year. Treasury bills are currently yielding 4%, the stock's beta is estimated to be 1.3 and the market is expected to have a rate of return of 9% over the next year. How much...
Paradise Tours, Inc. just paid a dividend of $2.50. Analysts expect the company's dividend to grow...
Paradise Tours, Inc. just paid a dividend of $2.50. Analysts expect the company's dividend to grow by 60% this year, by 30% in Year 2, by 20% in Year 3, and a constant rate of 4% in Year 4 and thereafter. The required return on PTI's stock is 15%. What is the Paradise Tours, Inc.'s dividend expected for the next year.
Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's...
Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 5% forever. Its stock price is $37.4 and its beta is 1.3. The risk-free rate is 2% and the expected return on the market portfolio is 8%. Part 1 What is the best guess for the cost of equity?
Link Co just paid a dividend of $1.00 per share. Analysts expect its dividend to grow...
Link Co just paid a dividend of $1.00 per share. Analysts expect its dividend to grow at 20% per year for the next tow years and then 3% per year thereafter. If the required rate of return in the stock is 8%, calculate the current value of the stock.
1. ABC, Inc., just paid a dividend of $1.36, and the company expect to grow its...
1. ABC, Inc., just paid a dividend of $1.36, and the company expect to grow its dividend at a constant rate of 4%. What is ABC's required rate of return if its today's value based on the dividend discount model is $34.66, ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 2. a. The common stock of Russel, Corp. is currently selling at $60 and investors require a rate of return of 16%. Russel is expected...
Assume Highline Company has just paid an annual dividend of $1.07. Analysts are predicting an 11.3%...
Assume Highline Company has just paid an annual dividend of $1.07. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 8.9% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of Highline's stock is $...
link co just paid a dividend of $1.00 per share. Analysts expect its dividend to grow...
link co just paid a dividend of $1.00 per share. Analysts expect its dividend to grow at 20% per year for the next two years and then 3% per year thereafter. If the required rate of return in the stock is 7%, calculate the current value of the stock. $32.49 $34.77 $35.82 $36.00 $37.20
Assume Highline Company has just paid an annual dividend of $ 0.99. Analysts are predicting an...
Assume Highline Company has just paid an annual dividend of $ 0.99. Analysts are predicting an 11.6 % per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.7 % per year. If Highline's equity cost of capital is 8.6 % per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell?
Assume Highline Company has just paid an annual dividend of $1.07. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 8.9% per year and its dividend payout ratio remains constant, for what price does the dividend-discount model predict Highline stock should sell? The value of Highline's stock is $...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago