Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 6PS
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose Lilly V, Inc. has just paid a dividend. The next dividend, to be paid in a year, is forecasted to be $4. If the growth rate of dividends is 7% and the discount rate is 11%, at what price will the stock sell? a.Less than $100 b.More than $100 c.$100 d.$111
Company Z-prime's earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5
and afterward, it will pay out all earnings as dividends. Assume next year's dividend is $9, the cost of equity is 9%, and next year's EPS
is $14. What is Z-prime's stock price?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Stock price
tes
Company Z-prime's earnings and dividends per share are expected to grow by 5% a year. Its
growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends.
Assume next year's dividend is $10, the cost of equity is 8%, and next year's EPS is $15. What is Z-
prime's stock price? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Stock price
Chapter 4 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 4 - True/false True or false? a. All stocks in an...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 - Dividend discount model Company Z-prime is like Z...Ch. 4 - Dividend discount model If company Z (see Problem...Ch. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Free cash flow Under what conditions does r, a...
Ch. 4 - Prob. 11PSCh. 4 - Prob. 12PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 23PSCh. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - DCF and free cash flow Permian Partners (PP)...Ch. 4 - DCF and free cash flow Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing Tree cash flow Phoenix Corp. faltered in...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...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Blue is currently selling for $26 per share. Its next dividend (in one year) is forecasted to be $1. Immediately after the dividend is paid, you expect the price to be $33. a. What is its expected dividend yield? b. What is its expected capital gain rate? c. What is the equity investors' expected return? Question content area bottom Part 1 a. Dividend yield: enter your response here%. (Round to two decimal places.) b. Capital gain rate: enter your response here%. (Round to two decimal places.) c. Expected Return: enter your response here%. (Round to two decimal places.)arrow_forwardCompany Z-prime’s earnings and dividends per share are expected to grow by 3% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $5, the market capitalization rate is 13% and next year’s EPS is $10. What is Z-prime’s stock price?arrow_forwardCompany Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 2. In year 3 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $7, the market capitalization rate is 4.5% and next year’s EPS is $16. What is Z-prime’s stock price? Multiple Choice $362 $368 $321 $355 $332arrow_forward
- Suppose Dragons, Inc. is expected to pay an annual dividend of $0.85 at t=1. Thereafter the dividend will increase at a growth rate g = 25% for two years, and at a growth rate g = 3% after two years. What should you pay for the stock at t=0 if the appropriate discount rate is 8%? Group of answer choices 24.47 18.98 27.47 34.67arrow_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_forwardCompany Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $7, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forward
- Answer the following questions using the dividend discount model to value stock. Part A (5 points) - The Francis Company is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. Francis' cost of equity is 10.33%. What is the company's current stock price?arrow_forwardThe Wellington Co. likes to use the dividend discount model to estimate its cost of equity. What should that be (in percent to two places) if their stock today is $54 and with a constant dividend growth of 3% their next dividend is estimated to be $0.91? Urgent please helparrow_forwardCOST OF COMMON QUITY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan’s common stock currently sells for $22.00 per share, its last dividend was $2.00, and it will pay a $2.12 dividend at the end of the current year. 1. Using the CDF approach, what is its cost of common equity? 2. What is youe estimate of Callahan's cost of common equityarrow_forward
- Buzz is currently paying a dividend of RM2. Its high dividend growth rate of 12 percent next year will drop to 7 percent for the foreseeable future. The discount rate of Buzz is 13 percent. What is the stock price of Buzz? Select one: A. RM40.25 B. RM33.33 C. RM42.68 D. RM37.33arrow_forwardCompany Z-prime's earnings and dividends per share are expected to grow by 3% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year's dividend is $5, the market capitalization rate is 13% and next year's EPS is $10. What is Z-prime's stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock pricearrow_forwardAssume MIE is a listed company and pays dividends once each year, and it just distributed this year’s $1.30 dividend per share and expected to grow by 9% for the next year. After the next year, you estimate that MIE will increase its dividends by 7 % per year forever. Required: a) What is the current value of this share if your discount rate is 10%?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY