PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 4, Problem 10PS
Constant-growth DCF model* Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the market capitalization rate is 8%, what is the current stock price?
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8. Constant-growth DCF model (S4.4) Company Z's earnings and dividends per share are expected to grow indefinitely by 5% a
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company's next annual dividend will be $12 and that dividends after one year will have a constant growth rate of 5%. If the required rate of return is 9%, then what should the stock price and dividend yield be?
Chapter 4 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 4 - Stock markets True or false? a. The bid price is...Ch. 4 - Stock quotes a. I would like to sell 1000 shares...Ch. 4 - Stock quotes Here is a small part of the order...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Valuation by comparables Look up P/E and P/B...Ch. 4 - Dividend discount model True or false? a. All...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...
Ch. 4 - Prob. 11PSCh. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Prob. 13PSCh. 4 - Cost of equity capital Under what conditions does...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Two-stage DCF model Company Z-prime is like Z in...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - Growth opportunities If company Z (see Problem 10)...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Valuing a business Permian Partners (PP) produces...Ch. 4 - Valuing a business Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing a business Phoenix Corp. faltered in the...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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- The 5-year average P/E ratio for a firm is 20.00. This year 's earning per share is $5.00 and it is expected to at a constant growth rate of 6%. What is the projected stock price for the next year? А. S4 В. $104 C. S80.25 D. $94.33 E. $106arrow_forwardd) BMC is expected to pay a $1 dividend per share next year. If the stock price today is $20, what is the required rate of return? Assume that the dividend is expected to grow at a constant growth rate of 3%.arrow_forwardIf the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11arrow_forward
- Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the cost of equity is 8%, what is the current stock price? Please explain with theory tooarrow_forwardGray Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $27.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? a. 5.95% b. 5.54% O c. 6.01% O d. 6.91% O e. 6.07%arrow_forwardgrey manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1=$1.25). The stock sells fo $27.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?arrow_forward
- Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years. a. If D₂ = $1.60, r = 10%, and g. - 6%, what is TIC's stock worth today? What are its expected dividend yield and capital gains yield at this time? 1. Find the price today. D₁ T. BL Year Dividend PV of dividends $1.7455+ 1.9041 $50.4595 $54.1091 - P. Dividend yield= Dividend yield- Dividend yield- $1.60 10.0% 20% $1.60 P₁ P₁ Cap. Gain yield-Expected return Cap. Gain yield Cap. Gain yield- P₁ D₁ $1.920 3.55% Cap. Gain yield Cap. Gain yield Cap. Gain yield 2. Find the expected dividend yield. Recall that the expected dividend yield is equal to the next expected annual dividend divided by the price at the beginning of the period. 20% 10.0% 6.45% - Short-run g; for Years 1-2 only. Long-run g; for Year 3 and all following years. - $1.92 3. Find the expected capital gains yield. The capital gains yield can be calculated by simply…arrow_forwardGordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the price expected to be in year 4? Answer a. $41.6 b. $50.50 c. $40 d. $10arrow_forward
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