Chapter 7, Problem 18P

Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 8%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1.5. You expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 20% during the second year (g1,2 = 20%). After Year 2, dividend growth will be constant at 6%. What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock? Do not round intermediate calculations. Round the monetary value to the nearest cent

Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $2.75. You expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 30% during the second year (g1,2 = 30%). After Year 2, dividend growth will be constant at 4%. What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest whole number. rs:   %  : $

Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of 7% and that its dividend yield is 8%. C&J is about as risky as the average firm in the industry and just paid a dividend (Do) of $1.5. Analysts expect that the growth rate of dividends will be 50% during the first year (90,1 = 50%) and 25% during the second year (91,2 = 25%). After Year 2, dividend growth will be constant at 7%. What is the required rate of return on C&J's stock? What is the estimated intrinsic price per share? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest whole number. rs: Po: $ 61 40.18 %

Assume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year and 25% the following year, after which growth should return to the 6% industry average. If the last dividend paid (D0) was $1, what is the value per share of your firm’s stock

Weber Integrated Systems Inc. is expected to pay a year-end dividend of $0.90 per share (i.e. D1 = $0.90), and that dividend is expected to grow at a constant rate of 4.00% per year in the future. The company's beta is 1.20, the market risk premium is 5.00 %, and the risk - free rate is 4.00 % . What is the company's current stock price? a. $15.00 b. $15.60 c. $16.33 d. $17.77 e. $ 18.20

Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $38.6 and its beta is 0.8. The risk-free rate is 2% and the expected market risk premium is 4.5%. 1. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.

Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 4% forever. Its stock price is $35.1 and its beta is 1.5. The risk-free rate is 2% and the market risk premium is 4.5%. A. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.

Company A is a worldwide delivery company that is expected to generate a dividend (per share) of $1.40 one year from now (i.e. at t=1). You are expecting that on average Company A's dividends will grow at 5% each year after that into the indefinite future. Assume for simplicity that all dividends are paid at the end of each year. Suppose that the appropriate discount rate for these dividends is 10%.   a. What is the current stock price for Company A? Assume that any dividend at t=0 has already been paid out. b. What do you expect the stock price of Company A to be next year (i.e. at t=1) immediately after the dividend has been paid out? c. What is the expected return for holding the stock of Company A over the year ahead? Hint: Find the IRR on the expected cash flows from buying and holding the stock for one year. The cash flows should include the purchase and sale of the stock as well as the dividend you will receive

1. The future earnings, dividends, and common stock price of Square Technologies Inc. are expected to grow at a rate of 5% per year. The company's common stock is currently selling for $30 per share and its last dividend was $4 a.What is the company's cost of common equity? b . If the firm's beta is 1.25, the risk-free rate is 6%, and the market rate of return is 14%, what will be the cost of common equity using the CAPM approach? C. If you have equal confidence in the inputs used for the two approaches, what is your estimate of the company's cost of common equity?