HomeworkLib
Question

if the current price of common stock is $55 per share in current dividends that was...

if the current price of common stock is $55 per share in current dividends that was just paid was $2.20 per share, what is the required rate of return on the stock if the growth rate and dividend is expected to be 7% per year?

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

Homework Answers

Answer #1

Current price = D0(1+g)/(rs-g)

55 = 2.20 (1+ .07)/(rs-.07)

55 = 2.20 * 1.07 /(rs-.07)

(rs- .07) = 2.20 *1.07 /55

(rs- .07) = 2.354/55

(rs- .07)   = .0428

rs =.0428 +.07

       = .1128 or 11.28%

0 0
Add a comment
Know the answer?
Add Answer to:
if the current price of common stock is $55 per share in current dividends that was...
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

  • 36. The current price of XYZ stock is $25.00 per share. If the dividend just paid...

    36. The current price of XYZ stock is $25.00 per share. If the dividend just paid by XYZ was $1.00 i.e., Do=1.00) and if investors' required rate of return is 10 percent, what is the expected growth rate of dividends for XYZ, based on the constant growth dividend valuation model?

  • Firm A just paid $2.50 per share and the current stock price is $36.00.... 1. Firm...

    Firm A just paid $2.50 per share and the current stock price is $36.00.... 1. Firm A just paid $2.5 per share, and the current stock price on the market is $36.00. The beta of this stock is 1.2, and the risk-free rate is 2%. and the market return is 10%. You expect that the long term growth rate of this dividend would be 4%. What is the value of this stock? 2. From Bloomberg, you got the following information....

  • #1 Van Buren, Inc., currently pays $2.24 per share in dividends on its common stock. Dividends...

    #1 Van Buren, Inc., currently pays $2.24 per share in dividends on its common stock. Dividends are expected to grow at 7.00 % per year forever. If you require a 13.00 % rate of return (i.e., the discount rate) on this investment, what value would you place on a share of Van Buren common stock? Assume that the current dividend was just paid. Answer format: Currency: Round to 2 decimal places # 2 Bad Investment Incorporated has "promised" investors to...

  • The common stock of Martin Co. is selling for ​$34.94 per share. The stock recently paid dividends of ​$1.25 per share a...

    The common stock of Martin Co. is selling for ​$34.94 per share. The stock recently paid dividends of ​$1.25 per share and has a projected constant growth rate of 9.9 percent. If you purchase the stock at the market​ price, what is your expected rate of​ return? Your expected rate of return is _____​%.

  • Just today, Fawlty Foods, Inc.'s common stock paid a $1.40 annual dividend per share and had a closing price of $21

    Just today, Fawlty Foods, Inc.'s common stock paid a $1.40 annual dividend per share and had a closing price of $21. Assume that the market's required return, or capitaliza¬tion rate, for this investment is 12 percent and that dividends are expected to grow at a constant rate forever. a. Calculate the implied growth rate in dividends. b. What is the expected dividend yield7 c. What is the expected capital gains yield7. 

  • The Grist Mill just paid a dividend of $3.46 per share on its stock. The dividends...

    The Grist Mill just paid a dividend of $3.46 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. What will the price of this stock be 7 years from today if investors require an annual return of 13 percent? A. $55 B. $49 C. $43 D. $58

  • As a financial analyst, you are tasked with finding the price per share of ABC, a...

    As a financial analyst, you are tasked with finding the price per share of ABC, a telecom company. PartA - For this part, assume that the Gordon growth model for stock valuation holds. The typical company in the telecom industry has a ratio of next period's dividend to current price D1/P0 = 2%, pays out 40% of earnings as dividends, and generates a return on equity of 15%. Your analysis suggests that the discount rate of the typical company in...

  • The Brennan Co. just paid a dividend of $2.50 per share on its stock. The dividends...

    The Brennan Co. just paid a dividend of $2.50 per share on its stock. The dividends are expected to grow at a constant rate of 7% per year indefinitely. Brennan Co. investors require a 12% return on their stock. a. What is the current price of a share of Brennan Co. Stock? b. What will be the price of a share in of Brennan Co. Stock in 5 years? c. What will be the price of a share of Brennan...

  • show all work 7. A share of common stock has an expected long-run constant dividend growth...

    show all work 7. A share of common stock has an expected long-run constant dividend growth rate of -5%, that is, the dividends are declining at 5% per year. The most recent dividend Do, was $5.00. The required rate of return on the common stock is 18%. Then, using the dividend growth model, calculate the current price of the stock. A share of common stock has an expected long-run constant dividend growth rate of 6%. and the most recent dividend...

  • 2. martin corporation's common stock sells for $55 per share. the current dividend is $2.75 per...

    2. martin corporation's common stock sells for $55 per share. the current dividend is $2.75 per share; dividends are expected to grow at 5.00 percent per year indefinitely. the floatation cost of new common stock is 20.00 percent. what is the firm's cost retained earnings?

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