Adequate information: Current dividend per period (D 0 ) = $3.80 Growth rate of dividend (g) = 4.5% Required rate of return (R) = 11% To determine: Current price of the stock Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

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Answer 1

Question

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

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Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $6.00 on its common stock in a single annual installment, and management plans on raising this dividend by 6.25 percent per year, indefinitely. If the required return on this stock is 9 percent, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $1.50 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year…

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6.5 percent per year indefinitely. If the required return on this stock is 8 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.80 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year dividend…

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $3.60 on its common stock in a single annual installment, and management plans on raising this dividend by 3.4 percent per year indefinitely. If the required return on this stock is 10.5 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Now suppose the company in (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.90 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint. Find the equivalent annual end-of-year dividend…

Answer 2

Question

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

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Answer 3

Question

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

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Answer 4

Question

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

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Answer 5

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

Answer 6

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

Answer 7

Chapter 9, Problem 30QAP

a.

Summary Introduction

Adequate information:

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

Answer 8

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

Answer 9

b.

Summary Introduction

Adequate information:

Frequency of payments in a year = 4

Current dividend per period (D₀) = $3.80

Growth rate of dividend (g) = 4.5%

Required rate of return (R) = 11%

To determine: Current price of the stock. Also, determine whether this model of stock valuation is appropriate or not.

Introduction: The dividend growth model computes the stock price with the help of the growth rate, required rate, and dividend for the next period.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 9 - Stock Valuation Why does the value of a share of...Ch. 9 - Stock Valuation A substantial percentage of the...Ch. 9 - Dividend Policy Referring to the previous...Ch. 9 - Prob. 4CQ Ch. 9 - Common versus Preferred Stock Suppose a company...Ch. 9 - Dividend Growth Model Based on the dividend growth...Ch. 9 - Growth Rate In the context of the dividend growth...Ch. 9 - Price-Earnings Ratio What are the three factors...Ch. 9 - Prob. 9CQ Ch. 9 - Prob. 10CQ

Solution Summary: The author explains how the dividend growth model computes the stock price with the help of the growth rate, required rate of return, and dividend for the next period.

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Chapter 9 Solutions