Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 8, Problem 1QP
Stock Values [LO1] The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson–Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
1
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.32 per share on its
stock. The dividends are expected to grow at a constant rate of 6 percent per year
Indefinitely.
a. If investors require a return of 11 percent on the company's stock, what Is the current
price?
b. What will the price be in 14 years?
10. I need help with finance home work question asap please
A stock that currently sells for $120 has EPS of $20.75. What is the annual rate of return on this stock if the company is expected to pay a dividend per share in the amount of $18 each year forever?
1. Stock Values Fowler, Inc., just paid a dividend of $2.55 per share on its
LO 1
stock. The dividends are expected to grow at a constant rate of 3.9 petcon
per year, indefinitely. If investors require a return of 10.4 percent on this
stock, what is the current price? What will the price be in 3 years? m
15 years?
LO 1
2. Stock Values The next dividend navment by Hoffman Inc will be $2.65
Chapter 8 Solutions
Fundamentals of Corporate Finance
Ch. 8.1 - Prob. 8.1ACQCh. 8.1 - Does the value of a share of stock depend on how...Ch. 8.1 - What is the value of a share of stock when the...Ch. 8.2 - Prob. 8.2ACQCh. 8.2 - Prob. 8.2BCQCh. 8.2 - Why is preferred stock called preferred?Ch. 8.3 - Prob. 8.3ACQCh. 8.3 - Prob. 8.3BCQCh. 8.3 - How does NASDAQ differ from the NYSE?Ch. 8 - A stock is selling for 11.90 a share given a...
Ch. 8 - An 8 percent preferred stock sells for 54 a share....Ch. 8 - Prob. 8.3CTFCh. 8 - Stock Valuation [LO1] Why does the value of a...Ch. 8 - Stock Valuation [LO1] A substantial percentage of...Ch. 8 - Stock Valuation [LO1] A substantial percentage of...Ch. 8 - Dividend Growth Model [LO1] Under what two...Ch. 8 - Common versus Preferred Stock [LO1] Suppose a...Ch. 8 - Prob. 6CRCTCh. 8 - Growth Rate [LO1] In the context of the dividend...Ch. 8 - Prob. 8CRCTCh. 8 - Prob. 9CRCTCh. 8 - Prob. 10CRCTCh. 8 - Prob. 11CRCTCh. 8 - Two-Stage Dividend Growth Model [LO1] One of the...Ch. 8 - Prob. 13CRCTCh. 8 - Price Ratio Valuation [LO2] What are the...Ch. 8 - Stock Values [LO1] The JacksonTimberlake Wardrobe...Ch. 8 - Stock Values [LO1] The next dividend payment by...Ch. 8 - Stock Values [LO1] For the company in the previous...Ch. 8 - Stock Values [LO1] Caan Corporation will pay a...Ch. 8 - Stock Valuation [LO1] Tell Me Why Co. is expected...Ch. 8 - Stock Valuation [LO1] Suppose you know that a...Ch. 8 - Stock Valuation [LO1] Estes Park Corp. pays a...Ch. 8 - Valuing Preferred Stock [LO1] Moraine, Inc., has...Ch. 8 - Prob. 9QPCh. 8 - Prob. 10QPCh. 8 - Prob. 11QPCh. 8 - Prob. 12QPCh. 8 - Stock Valuation and PS [LO2] TwitterMe, Inc., is a...Ch. 8 - Stock Valuation [LO1] Bayou Okra Farms just paid a...Ch. 8 - Prob. 15QPCh. 8 - Nonconstant Dividends [LO1] Maloney, Inc., has an...Ch. 8 - Nonconstant Dividends [LO1] Lohn Corporation is...Ch. 8 - Supernormal Growth [LO1] Synovec Co. is growing...Ch. 8 - Prob. 19QPCh. 8 - Prob. 20QPCh. 8 - Prob. 21QPCh. 8 - Valuing Preferred Stock [LO1] E-Eyes.com just...Ch. 8 - Prob. 23QPCh. 8 - Two-Stage Dividend Growth Model [LO1] A7X Corp....Ch. 8 - Two-Stage Dividend Growth Model [LO1] Navel County...Ch. 8 - Stock Valuation and PE [LO2] Summers Corp....Ch. 8 - Stock Valuation and PE [LO2] You have found the...Ch. 8 - Stock Valuation and PE [LO2] In the previous...Ch. 8 - Stock Valuation and PE [LO2] YGTB, Inc., currently...Ch. 8 - PE and Terminal Stock Price [LO2] In practice, a...Ch. 8 - Stock Valuation and PE [LO2] Fly Away, Inc., has...Ch. 8 - Prob. 32QPCh. 8 - Stock Valuation [LO1] Most corporations pay...Ch. 8 - Nonconstant Growth [LO1] Storico Co. just paid a...Ch. 8 - Nonconstant Growth [LO1] This ones a little...Ch. 8 - Constant Dividend Growth Model [LO1] Assume a...Ch. 8 - Two-Stage Dividend Growth [LO1] Regarding the...Ch. 8 - Prob. 38QPCh. 8 - Prob. 1MCh. 8 - Prob. 2MCh. 8 - What is the industry average priceearnings ratio?...Ch. 8 - Prob. 4MCh. 8 - Assume the companys growth rate slows to the...Ch. 8 - Prob. 6M
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
- Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?arrow_forward7. I need help with finance home work question asap please A company just paid a dividend of $4.15 per share. The company is expected to increase its dividend by 19% per year for each of the next 2 years and then maintain a constant dividend growth rate of 5% forever. What is this stock's expected price per share 2 years from now if the required return on this stock is 13.45%?arrow_forwardVenus Airlines will pay a $8 dividend next year on its stock, which is currently selling at $100 per share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever? 3% 13% 5% 10% unansweredarrow_forward
- Suppose you have desired to hold the stock for 5years and sale it thereafter. Dividend is expected to be 100 per year. The stock is expected to be sold at 1,000 after 5 years. How much maximum price do you pay today if the required rate of return is 10%. A. 1030 B. 1245 C. 379 D. 1000arrow_forward1. Metrobank’s stock is currently trading at P25 per share. The stock’s dividend is projected to increase at a constant rate of 7 percent per year. The required rate of return on the stock is 10 percent. What is the expected stock price five years from today? a. P32.77 b. P35.06 c. P36.60 d. P28.14 2. World Wide Interlink Corp. has decided to undertake a large project. Consequently, there is a need for additional funds. The financial manager plans to issue preferred stock with an annual dividend of P5 per share. The stock will have a par value of P30. If investors’ required rate of return on this investment is currently 20%, what should the preferred stock’s market value be? a. P20 b. P10 c. P25 d. P15 3. Assume that you wish to purchase a 30-year bond that has a maturity value of P1,000 and a coupon interest rate of 9.5%, paid semiannually. If you require a 6.75% rate of return on this investment, what is the maximum price that you should be willing to pay for this…arrow_forwardIslander Inc. is a new firm in a rapidly growing industry. The company would be paying $2.50 in dividend next year. After that the company intends to grow the dividend at a 8% rate annually over a long period. You plan to buy the stock now and expect to sell it for $48.23 three years from now. What price must you pay now if your required rate of return is 10%? $42.93 O $125.00 O $35.71 O $40.62arrow_forward
- 9.1. Stock Values The Nearside Co. just paid a dividend of $2.07 per share on its stock. The dividends are expected to grow at a constant rate of 4.3 percent per year, indefinitely. If investors require a return of 11 percent on the stock, what is the current price? What will the price be in 3 years? In 15 years?arrow_forward17. A firm is currently paying a dividend of $3 per share. It is expected to grow its dividend at the rate of 15 percent per annum for the next two years. After two years, the dividend is expected to grow at a constant rate of 4 percent per year indefinitely. If the investors require a return of 10 percent, then what should be the share price after the firm paid the dividend in year 1? a. 69.738 b. 50.000 c. 39.675 d. 70.092 e. 66.125arrow_forwardQuestion 3. Consider the current price of a stock is $65.88. If dividends are expected to be $1 per share pays annually for the next five years, and the required return is 10%. (1) What should the price of the stock be in five years when you plan to sell? (2) If the dividend and required return remain the same, and the stock price is expected to increase by $1 five years from now, does the current stock price also increase by $1? Why or why not?arrow_forward
- ● Suppose a firm is expected to increase dividends by 20% in one year and by 15% in two years. After that dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and ● the required return is 20%, what is the price of the stock? Remember that we have to find the PV of all expected future dividends. 7-22arrow_forwardTechWorld Ltd is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent? $10.75 $9.80 $11.88 $11.50arrow_forwardK The current price of a stock is $80.24. If dividends are expected to be $1.00 per share for the next six years, and the required return is 8%, then what should the price of the stock be in 6 years when you plan to sell it? The price 6 years from now will be $. (Round your response to the nearest dollar.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY