YZ Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 17% during the next 2 years, at 15% the following year, and at a constant rate of 7% during Year 4 and thereafter. Its last dividend was $1.55, and its required rate of return is 12%. a. Calculate the value of the stock today. b. Calculate P1 and P2 (Prices for Year 1 and Year 2). c. Calculate the dividend and capital gains yields for Years 1, 2, and 3.

YZ Inc. is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 17% during the next 2 years, at 15% the following year, and at a constant rate of 7% during Year 4 and thereafter. Its last dividend was $1.55, and its required rate of return is 12%. a. Calculate the value of the stock today. b. Calculate P1 and P2 (Prices for Year 1 and Year 2). c. Calculate the dividend and capital gains yields for Years 1, 2, and 3.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The stock of Alpha Tool sells for $18.30 per share. Its current dividend rate, D0, is $2 per share. Analysts and investors expect Alpha to increase its dividends at a 10 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 6 percent for years 3 and 4 and then to settle down to 4 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number. %
Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent. Safeco’s recent dividend was $1.25.What is the value of Safeco stock when the required return is 10 percent? (Round your answer to 2 decimal places.)
As an analyst, you have gathered the following information on a company you are tracking. The current annual dividend is $1.75. Dividends are expected to grow at a rate of 14% over the next 4 years, and then decline linearly to 5% over the next 7 years, and then remain at a long term equilibrium growth rate of 5% in perpetuity; the required return is 10%. Calculate the value of the company
XYZ, Inc. has been growing at 10% per year. You believe this rate will continue for 4 more years, and then will increase to 15% per year and remain indefinitely. If the most recent dividend paid was $3 (D0) and the required return is 10%, then what is the value of the stock today? create an excel file
Diana Corporation anticipates a 10 percent growth in net income and dividends. Next year, the company expects earnings per share of P5 and dividends per share of P3. Diana will be having its first public issuance of common stock. The stock will be issued at P40 per share. REQUIREMENTS: 1. What is the P/E ratio? 2. What is the required rate of return on the stock?
The Kilgon Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 11 percent, and the stock currently sells for $65 per share. What is the projected dividend for the coming year? How do you use Goal Seek to find the dividends? (Excel)
Summerdahl Resort's common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50), and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? Round your answer to two decimal places.
Crane Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 6 percent. If the required rate of return is 15.50 percent, what is the current value of the stock?
Francis Inc.'s stock has a required rate of return of 9.25%, and it sells for $70 per share. The dividend is expected to grow at a constant rate of 5.00% per year. What is the expected year-end dividend, D1?
Turbo Technology Computers is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next two years, at 13% in the third year, and at a constant rate of 6% thereafter. Turbo's last dividend was $1.15, and the required rate of return on the stock is 12%. Complete the following calculations: a.Calculate the value of the stock today. b. Calculate P1^ and P2^. c. Calculate the dividend yield and capital gains yield for Years 1, 2, and 3. 2. Kassidy's Kabob House has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock's required rate of return? Assume the market is in equilibrium with the required return equal to the expected return. 3. McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The…
ABC, Inc has a current dividend of $1.00 and a required rate of return of 12%. A dividend growth rate of 15% is projected for the next 2 years, followed by a 10% growth rate for the next 4 years before settling down to a constant 4% growth rate thereafter. What is the expected stock price of ABC in year 4? 1) $14.19 2) $17.51 3) $20.64 4) $23.18
c. Pedih Hati Berhad's common stock is currently selling for RM34.00. It is expected to pay a dividend of RM2.00 at the end of the year. Dividends are expected to grow at a constant rate of 5% indefinitely. Compute the required rate of return on Pedih Hati Berhad's common stock.