Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $2 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $4 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's investors expect to earn a return of 12% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $2 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $4 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's investors expect to earn a return of 12% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $4 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $6 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's investors expect to earn a return of 15% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price
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Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 19.50% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 5.75%. The company’s last dividend was $1.60, its beta is 1.95, the market risk premium is 8.50%, and the risk-free rate is 6.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. $18.18 B. $14.91 C. $16.00 D. $19.64 E. $16.55
Ceebros Builders is expanding very fast and is expected to grow at a rate of 25 percent for the next four years. The company recently paid a dividend of $3.60 but is not expected to pay any dividends for the next three years. In year 4, management expects to pay a $5.7 dividend and thereafter to increase the dividend at a constant rate of 7.0 percent. The required rate of return on such stocks is 17.5 percent. a. Calculate the present value of the dividends during the fast-growth period. (Round answer to 2 decimal places, e.g. 15.25.) Present value of dividends $
Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth. rate falling off to a constant 6.8 percent, thereafter. The required return is 15 percent and the company just paid a dividend of $3.15. What are the dividends each year for the next four years? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16. What is the share price in three years? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $2.00 coming 3 years from today. The dividend should grow rapidly at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 15%, what is the value of the stock today? (Assume the market is in equilibrium with the required return equal to the expected return.) Do not round intermediate calculations. Round your answer to the nearest cent. $
Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $3.75000 dividend at that time (D, = $3.75000) and believes that the dividend will grow by 19.50000% for the following two years (D and D₂). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.96000% per year. Goodwin's required return is 13.20000%. Fill in the following chart to determine Goodwin's horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places. Term Horizon value Current intrinsic value Value If investors expect a total return of 14.20%, what will be Goodwin's expected dividend and capital gains yield in two years-that is, the…
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 5% per year. If the required return on the stock is 14%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 60% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 13%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent. DISCLAIMER: this is my second time posting this question (the answer is NOT $40.40) thank you!
Sandhill Departmental Stores management has forecasted a growth rate of 40 percent for the next two years, followed by growth rates of 25 percent and 20 percent for the following two years. It then expects growth to stabilize at a constant rate of 7.5 percent forever. The firm paid a dividend of $3.90 recently. If the required rate of return is 14 percent, what is the current value of Sandhill's stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.25.) Current value $Type your answer here
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 28% for the next 2 years, 18.00% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.25%. The company’s last dividend was $1.00, its beta is 1.75, the market risk premium is 6.55%, and the risk-free rate is 4.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 21.45% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.50%. The company’s last dividend was $1.75, its beta is 1.15, the market risk premium is 9.70%, and the risk-free rate is 5.00%. What is the current price of the common stock? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.

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