Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Blue Co. has been in the difficult times due to
pandemic. The company's analysts predict
that earnings and dividends will decline at a
rate constant rate of 5% annually. Assume
that cost of stock is 11% and dividend to be
declared one year from now is P2.00. What
will be the price of the company's stock three
years from today? *
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- 6. Stockade Corp. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. Investors require a return of 11 percent on the company's stock. What is the current stock price? What will the stock be in 3 years? What will the stock be in 15 years? Do not round intermediate calculations and round your final answer to 2 decimal places. 7. Plantoday Inc. will pay a $3.04 per share dividend next year. The company pledges to increase its dividend by 3.8 percent per year indefinitely. If you require a return of 11 percent on your investment how much will you pay for the company's stock today? Round your answer to 2 decimal places. 8. Lily Corp. has an issue of preferred stock outstanding that pays a $5.50 dividend every year in perpetuity. If this issue currently sells for $108 per share, what is the required return? Round your answer to 2 decimal places. 9. Epion Inc. is expected to pay the following…arrow_forwardNew Gadgets, Incorporated, currently pays no dividend but is expected to pay its first annual dividend of $4.90 per share exactly 7 years from today. After that, the dividends are expected to grow at 3.5 percent forever. If the required return is 11.3 percent, what is the price of the stock today?arrow_forwardMetallica Bearings, Inc., is a youngstart-up company. No dividends will be paid on the stock over the next nine yearsbecause the firm needs to plow back its earnings to fuel growth. The company will pay a$17 per share dividend 10 years from today and will increase the dividend by 3.9 percentper year thereafter. If the required return on this stock is 12.5 percent, what is the currentshare price?arrow_forward
- Carnes Cosmetics Co.'s stock price is $40, and it recently paid a $1.00 dividend. This dividend is expected to grow by 19% for the next 3 years, then grow forever at a constant rate, g; and rs = 16%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forwardMetallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 10 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $13.50 per share 11 years from today and will increase the dividend by 5.25 percent per year thereafter. If the required return on this stock is 13.25 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share pricearrow_forwardCarnes Cosmetics Co.'s stock price is $59, and it recently paid a $1.25 dividend. This dividend is expected to grow by 27% for the next 3 years, then grow forever at a constant rate, g; and rs = 11%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forward
- The earnings of Eastern Corp. are expected to grow at an annual rate of 12% over the next 5 years and then slow to a constant rate of 8% per year. The company currently pays a dividend of $0.36 per share. What is the value of the company’s stock to an investor who requires a 14% rate of return? If the stock has a market price of $15, do you buy it ?arrow_forwardFletcher's Company's current stock price is $17, and its last dividend was $2.50. In view of Fletcher's strong financial position and its consequent low risk, its required rate of return is only 17%. If dividends are expected to grow at a constant rate, g, in the future, and if ks is expected to remain at 17%, what is Fletcher's expected stock price 3 years from now?arrow_forwardWalmart has just paid an annual dividend of $3.56. Dividends are expected to grow by 9% for the next 4 years, and then grow by 4% thereafter. Walmart has a required return of 9%. What is the expected dividend in four years? What is the terminal value in four years (P4)? What is the value of the stock now?arrow_forward
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