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
Characteristics of Investment - Venture Capitalists Venture capitalists, will just invest in a company whether there is a reasonable chance such the company will be successful

Definition of 'Capital Budgeting': The process in which a business calculates whether projects such as building a new plant or investing in a long-term risk are worth pursuing

Discuss the necessity of risk adjusted hurdle rates for companies with diverse lines of business. Every company invests in new projects based on the expectation of earnings

Ask questConsider an 8% coupon bond selling for $953.10 with 3 years until maturity making annual coupon payments. The interest rates in the next 3 years will be, with certainty, r

Earnings Method or Earning Basis Valuation By using the earning valuation method, a company will employ its P/E ratio to value its shares. P/E    =  MV/E MV    =   E x P

Mr. and Mrs. smith are considering the purchase of a house. They can afford to make  a mortgage payment of $750 per month. If the current mortgage interest rate is 9% with monthly

Example of Earnings Yield Valuation Estimated maintainable earnings are £240,000 per annum; rate of return required is 25 percent. Calculate the value of the business. V


Matching Approach - Financing Current Assets This approach is further referred to as the hedging approach. Beneath this approach, the firm adopts a financial plan that involve

Instructions: Read the Herzberg findings related to extrinsic and intrinsic factors driving job satisfaction, dissatisfaction and motivation. To what extent should employers feel r