P8-24 Two-Stage Dividend Growth Model [LO1] A7X Corporation just paid a dividend of $1.35 per share. The dividends are expected to grow at 35 percent for the next 9 years and then level off to a growth rate of 6 percent indefinitely. If the required return is 15 percent, what is the price of the stock today? Multiple Choice $67.32 $3.89 $94.85 $98.72 O $96.78

P8-24 Two-Stage Dividend Growth Model [LO1] A7X Corporation just paid a dividend of $1.35 per share. The dividends are expected to grow at 35 percent for the next 9 years and then level off to a growth rate of 6 percent indefinitely. If the required return is 15 percent, what is the price of the stock today? Multiple Choice $67.32 $3.89 $94.85 $98.72 O $96.78

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 12P: Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is...

See similar textbooks

Similar questions

Start with the partial model in the file Ch07 P27 Build a Model.xlsx on the textbook’s Web site. Hamilton Landscaping’s dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%. What is Hamilton’s estimated stock price today? If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year? What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why aren’t these the same as for the first year?
Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?
Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
Q15 Consider a firm that had been priced using a 10 percent growth rate and a 12 percent required return. The firm recently paid a $1.20 dividend. The firm just announced that because of a new joint venture, it will likely grow at a 10.5 percent rate.How much should the stock price change (in dollars and percentage)? (Round your answers to 2 decimal places.) CHANGE IN STOCK PRICE CHANGE IN STOCK PERCENT. %
S08-19 Supernormal Growth [LO1] Mobray Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 10 percent, and the stock currently sells for $79 per share. What is the projected dividend for the coming year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Problem 10.17 (calmulation of g and EPS) Sidman Buduct's common stock currently sells for $41 a share. The firm is expected to earn $4,10 per share this year and to dividend of $2.60, and it finances only with pay a year-end common equity. a) If investors require a 10%. return, what is the expected growth rate? Round your answer to places. two decimal % b) If Sidman reinvests retained earnings in Projects whose average return is equal to the stock's expected rate of return, what will be next year's EPS? (Hintis = (1-Payout ratio) ROE). Round to the nearest cent. your criswer $ share - per
P8-18 Supernormal Growth [LO1] Synovec Company is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent and the company just paid a $2.30 dividend. what is the current share price?
Q24 Paccar’s current stock price is $48.20 and it is likely to pay a $0.80 dividend next year. Since analysts estimate Paccar will have an 8.8 percent growth rate, what is its required return? (Round your answer to 2 decimal places.) REQUIRED RETURN. %
Synovec Company is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next 3 years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 11 percent and the company just paid a $2.30 dividend. what is the current share price? Multiple Choice C $61.80 $63.04 $60.57 #56 51
Question 7. Dividends on CCN corporation are expected to grow at a 9% per year. Assume that the discount rate on CCN is 12% and that the expected dividend per share in one year is $0.50. CCN has just paid a dividend, so the next dividend is the $0.50 to be paid one year from now. Calculate today's price per share fo CCN. *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.
Problem 9,17 (Constant Growth) Stick Vali Your bruker offers to sell you sume shares of Bahnsen & Co. common stuck that paid a dividend of $1.00 yesterday. Bahnsen's dividend is expected to grow at 5% next 3 years. If per year for the you buy the stuck, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 13% a) Find the expected dividend for each of the next 3 years; that is calculate D₁, D₂, and D3. Note that Do $1.00. 0₁ = $ D₂ = $ D₂ = 1 2 copilul raya b) Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is calculate the PVs of Dg, Pr, and Ds, and then sem these PUs. 4 elds C.) You expect the price of the stock 3. years from now to be $15.19; that is, you expect P3 to equal $15.19. Discunted at a 13% rate, what is the present value of this expected future stuck price? In other words, Calarlate the PV of $15.19. $ d) If you plan to buy the stock, hold it for 3 years, and then sell it…
P7-5 Variable Growth A fast growing firm recently paid a dividend of $0.50 per share. The dividend is expected to increase at a 20 percent rate for the next 3 years. Afterwards, a more stable 10 percent growth rate can be assumed. If a 12 percent discount rate is appropriate for this stock, what is its value? Use equation: Do(1+ g,)* (1+ .) i- 92 (1+i) D. (1+ g,)* + B- B(1+ g.) , D,(1+ g.)* ¸o , D,(1+ g) + (1+i) (1+i)° 3 1+i