The constant-growth dividend discount model

Assignment Help Financial Management
Reference no: EM131084259

 Jand, Inc., currently pays a dividend of $1.58, which is expected to grow indefinitely at 4%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $42.91, what is the required rate of return?

Reference no: EM131084259

Questions Cloud

Research to develop new computer game : Capital Budgeting Exercise 2 Your Company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $300,000 on a machine to produce the new game. The firm has a tax rate of 35 percent, an opportunity cost of capita..
Should hatfield implement the plans : Repeat the analysis performed in the previous question but now assume that Hatfield is able to improve the following inputs: Reduce operating costs (excluding depreciation) to sales to 89.5% at a cost of $40 million. Should Hatfield implement the pla..
What is the effective cost of borrowing in case : Your firm has an average collection period of 23 days. Current practice is to factor all receivables immediately at a discount of 1.3 percent. What is the effective cost of borrowing in this case?
Price minus selling cost is dollar gross margin : The retail price for a wrinkle-reducing injection is $550. Retailers buy directly from the manufacturer, who has a margin of 80 percent on their product. If the retailer margin is 40 percent, what is the manufacturer selling price to the retailer?  w..
The constant-growth dividend discount model : Jand, Inc., currently pays a dividend of $1.58, which is expected to grow indefinitely at 4%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $42.91, what is the required rate of return?
What is the stocks expected return and stocks beta : The market portfolio has an expected return of 9 percent with a 10 percent volatility. The risk-free rate is 4 percent. A stock has a 20 percent volatility and a correlation coefficient of minus 0.10 with the market. a. What is the stock’s beta? What..
What is intrinsic value of deployment specialists stock : Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 22% for two years and then at 5% thereafter. If the required return for Deployment Specialists is 11.0%, what is the intrinsic value of Deployment Specialists st..
Market prices adjust to positive earnings announcements : You want to test the speed with which stock market prices adjust to positive earnings announcements. Company A makes its earnings announcement on May 20 and company B on June 16. You collected for each company daily share price returns two days befor..
What are the volatility and beta of the investor portfolio : The market portfolio has an expected return of 11 percent with a 25-percent volatility. The risk-free rate is 5 percent. a. Investor A with $180,000 has a target expected return of 9 percent. How should he invest his $180,000? b. What are the volatil..

Reviews

Write a Review

Financial Management Questions & Answers

  The proportion of the optimal risky portfolio

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 14% and a standard deviation of 20%. Stock B has an expected return of 10% and a standard deviation of 5%. The correlation coefficient between th..

  The task of estimating the value of its equity

Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 36% of the company’s present value, and you believe that at this capital structure the company’s d..

  What is the market price of the bond

A bond pays an annual coupon of $121 has a face value of $1,000 and has 6 years remaining until maturity. If the current market required rate of return on bonds of this type is 9% what is the market price of the bond? State your answer in dollars and..

  Semi annual compounding period-what is the price of the bond

You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semi annual compounding periods. What is the price of the bond?

  The constant growth model takes into consideration

The constant growth model takes into consideration then the capital gains investors expect to earn on a stock. Two firms with the same expected dividend and growth rate must also have the same stock price. It is appropriate to use the constant growth..

  What is the holding period return

Assume you short sell 300 share of the stock of EFG Corporation. Margin requirements are 60 percent. The price was $34 per share. One year later, the price of the stock is $35 per share. During that time, the company paid $0.75 per share in dividends..

  Calculate debt ratio and equity ratio

Binomial Tree Farm’s financing includes $6.7 million of bank loans. Its common equity is shown in Binomial’s Annual Report at $6.84 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $16.3 per sha..

  Companies with rapidly growing levels of sales do not need

Companies with rapidly growing levels of sales do not need to worry about raising funds from outside the firm.  Do you agree or disagree with this statement?  Explain.

  What is the company cost of equity capital

David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.08%. What is the comp..

  Project available that requires an initial investment

Stackhouse Industries has a new project available that requires an initial investment of $5.5 million. The project will provide unlevered cash flows of $775,000 per year for the next 20 years. The company will finance the project with a debt-to-value..

  The gain or loss on retirement

Chang Industries has bonds outstanding with a par value of $221,600 and a carrying value of $235,400. If the company calls these bonds at a price of $228,000, the gain or loss on retirement is:

  Using the perpetual growth method

Suppose the dividends for the Seger Corporation over the past six years were $1.36, $1.44, $1.53, $1.61, $1.71, and $1.76, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd