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
A firm has a $100 million capital budget. It is considering two project, each costing $100 million. Project A has an IRR of 20%; has an NPV of $9 million; and will be terminated af

Basic EOQ Model The basic inventory decision model is Economic Order Quantity or called EOQ model. This model is specified via the following equation as: Whereas:Q is

Timing of Investment a Stock Exchange The ideal way of creation profits on the stock exchange is to buy on the bottom of the market or lowest M.P.S and sell at the top of the

Example of Miller-Orr Model XYZ's management has put the minimum cash balance to be equivalent to Sh.10, 000. The standard deviation of daily cash flow is of Sh.2, 500 and the

Advantages of Bonus Matter a) Tax advantages         Shareholders can sell new shares, and create cash in form of capital gains such is tax exempt unlike cash dividends wh

Present Value of Uneven Periodic Sum - DCF Technique As in investment decisions it is very rare to acquire even periodic returns and in most cases a company will generate a st

The following NPV's have been calculated to determine if a compressor installation should be accelerated from Year 3 to Year 7. The compressor cost is $1,500,000.   a. C

The Jacobs company needs to acquire a new lift truck for transporting its final product to the warehouse. One alternative is to purchase the truck for $45,000. Maintenance of th

Tarniwala and Dealer in Non-cleared Securities Tarniwala: He/she is a specialist or jobber in selected shares. He/she makes market i.e. provide continuity to dealings. They

Liquidity Preference Theory This theory states that short term bonds are extremely favorable than long term bonds for two (2) purposes. 1. Investors usually prefer short te