Calculate the current price of the common stock, Finance Basics

Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?

Stock Price Today (P0) = ____________________.

4b. A 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. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's stock price today (P2012)? All things held constant, what will be the price of this company's stock in eight years (P2020)?

Stock Price Today (P2012) = ____________________.

Stock Price in 8 Years (P2020) = ____________________.

 

Posted Date: 4/1/2013 3:38:10 AM | Location : United States







Related Discussions:- Calculate the current price of the common stock, Assignment Help, Ask Question on Calculate the current price of the common stock, Get Answer, Expert's Help, Calculate the current price of the common stock Discussions

Write discussion on Calculate the current price of the common stock
Your posts are moderated
Related Questions
Executive Share Options Plans In a share option format, selected staff can be provided a number of share alternatives, each of which that provides the holder the right after a

Example of Valuation of Bonds and Debentures K is contemplating purchasing a 3 year bond worth 40,000/= carrying a nominal coupon rate of interest of 10 percent.  K necessary

A firm has the following accounts: What is the net income for the period? Net patient revenue = $1,500,000 Supply expense = $200,000 Depreciation expense = $100,000 Salaries and b

Which of the following retirement plan alternatives would allow Tom the greatest deductible contribution while providing him with only a small cash flow commitment each year based


Maghrabi Enclosure follows a moderate current asset investment policy, but it is considering whether to shift to a different strategy.  The firm's annual sales are $500,000; its fi

Hull-White model As an extension of the Vasicek model, Hull-White model (1990) assumed that the short interest rate process follows the mean-reverting stochastic differential e

Stock Exchange Index or SEI Stock Exchange Index is a measure of relative changes in prices of stocks from one duration to another index. Nairobi Stock Exchange twenty (20) -

Similarities between Equity Finance and Preference Similarities among Equity Finance and Preference are as follows: a) Both may be permanent whether preference share capita

Payback Period Method - Traditional Methods This method gauges the viability of a venture via taking the outflows and inflows over time to ascertain how soon a venture can pay