General Importers announced that it will pay a dividend of $4.15 per share one year from...
General Importers announced that it will pay a dividend of $4.15 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 7 years. Then, 9 years from today, the company will begin paying an annual dividend of $2.25 forever. The required return is 12.4 percent. What is the price of the stock today?
Homework Answers
| Price of stock is present value of future dividend payment | |||||||
| Year | Dividend | Discount factor @ 12.4% | Present value (Dividend*Discount factor) | ||||
| 1 | $4.15 | 0.88968 | 1/(1.124^1) | $3.69 | |||
| 9 | $18.15 | 2.25/0.124 | 0.34922 | 1/(1.124^9) | $6.34 | ||
| Price of stock today | $10.03 | ||||||
| Thus, price of stock today is $10.03 | |||||||
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General Importers announced that it will pay a dividend of $4.15
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General Importers announced that it will pay a dividend of $3.75 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 6 years. Then, 8 years from today, the company will begin paying an annual dividend of $1.85 forever. The required return is 11.6 percent. What is the price of the stock today?
General Importers announced that it will pay a dividend of $3.95 per share one year from...
General Importers announced that it will pay a dividend of $3.95 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 7 years. Then, 9 years from today, the company will begin paying an annual dividend of $2.05 forever. The required return is 12 percent. What is the price of the stock today?
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General Importers announced that it will pay a dividend of $3.75 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 6 years. Then, 8 years from today, the company will begin paying an annual dividend of $1.85 forever. The required return is 11.6 percent. What is the price of the stock today?
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