Grizzlies Inc. expects to pay $3.00 dividend on its common stock at the end of the year. The dividend is expected to grow 25% a year for the first two years, after which the dividend is expected to grow at a constant rate of 5% a year indefinitely. The stock’s beta is 1.2, the risk-free rate of interest is 6%, and the rate of return on the market portfolio is 11%. What is the company’s current stock price?

Grizzlies Inc. expects to pay $3.00 dividend on its common stock at the end of the year. The dividend is expected to grow 25% a year for the first two years, after which the dividend is expected to grow at a constant rate of 5% a year indefinitely. The stock’s beta is 1.2, the risk-free rate of interest is 6%, and the rate of return on the market portfolio is 11%. What is the company’s current stock price?

Name: Grizzlies Inc. expects to pay $3.00 dividend on its common stock at th
Uploaded: 2024-03-20T06:51:32.000Z
Channel: Bartleby
Description: Grizzlies Inc. expects to pay $3.00 dividend on its common stock at the end of the year. The dividend is expected to grow 25% a year for the first two years, after which the dividend is expected to grow at a constant rate of 5% a year indefinitely. T

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

See similar textbooks

Similar questions

The future earnings, dividends, and common stock price of Core-Tech, Inc. are expected to grow 6% per year. Core-Tech's common stock currently sells for $21 per share; its last dividend was $2.00; and it will pay a $2.30 dividend at the end of the current year. If the firms beta is 1.9, the risk free rate is 8%, and the average return on the market is 14%, what is the firms cost of common equity (retained earnings) using the CAPM approach?
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the future. Shelby's common stock sells for $28.50 per share, its last dividend was $2.50, and the company will pay a dividend of $2.70 at the end of the current year. If the firm's beta is 2.0, the risk-free rate is 5%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. %
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the future. Shelby's common stock sells for $28.50 per share, its last dividend was $2.50, and the company will pay a dividend of $2.70 at the end of the current year. If the firm's beta is 2.0, the risk-free rate is 5%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range.) % On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %
Hadlock Healthcare expects to pay a $3.00 dividend at the end of the year (D1 = $3.00). The stock’s dividend is expected to grow at a rate of 15 percent a year until three years from now (t = 3). After this time, the stock’s dividend is expected to grow at a constant rate of 4 percent a year. The stock’s required rate of return is 11 percent. What is the price of the stock today? 46.32 54.48 48.33 51.50
Runyon Industries is expected to enjoy a very rapid growth rate in dividends of30 percent a year for the next three years. This growth rate is then expected to slow to20 percent a year for the next five years. After that time, the growth rate is expected tobe 6 percent a year. D0 is $2. The beta for this stock is 1.5. The expected return on the market is 11 percent, and the risk‐free rate is 5 percent. What is the estimated price of the stock?
Morgan Inc., is expected to pay an annual dividend of $2.40 per share in the coming year.it is expected that dividends will keep growing with a constant rate of 2.7% every year. What is the market price of this stock if you require 8 percent rate of return? What will be the expected stock price three years from now? A- BI
Simon Fixtures Corp. is expected to pay $2.00 per share in dividends at the end of the year. The growth rate in dividends is expected to be constant at 8% per year. If the stock is selling for $50 per share, what is the required rate of return?
Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow at the rate of 9% per year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 20%. The stock of Todd Mountain Development Corporation has a beta of 0.60. Using the constant-growth DDM,calculate the intrinsic value of the stock.
A company is expected to pay a dividend of $3.0 per share next year. Over the next three years, the dividends are expected to grow at 15%. Beyond that, the dividends are expected to grow at a constant rate of 4%. The required rate of return is 11%. What is the price of this stock today?
Gamzan Corporation is expected to pay dividend of Rs. 20 this year. This dividend is expected to grow at 11% rate for the next 4 years, after that dividend is expected to grow at a rate of 14% for the next 3 years and after that dividend is expected to grow at a constant rate of 6% for ever. What should be the market price per share of this stock, if the expected return on this stock is 18%? If the market price per share is Rs. 122, will you purchase this share? Give reasons to justify your answer.
Gamzan Corporation is expected to pay dividend of Rs. 20 this year. This dividend is expected to grow at 11% rate for the next 4 years, after that dividend is expected to grow at a rate of 14% for the next 3 years and after that dividend is expected to grow at a constant rate of 6% for ever. What should be the market price per share of this stock, if the expected return on this stock is 18%? If the market price per share is Rs. 122, will you purchase this share? Give reasons to justify your answer. do it with proper formula process on page
A company currently pays a dividend of $1.8 per share (D0 = $1.8). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.8, the risk-free rate is 9.5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.