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
After read all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.50Y

In the present case, we need to take a decision about implementing one of the available two options, based on various factors. The available two options are either to complete a se


DEFINE THE TERM OPTION IN DETAIL?

Creditors Payment Period Ratio Creditors payment period =   365/ Creditors turnover                                           = (365 x Average creditors)/Annual credit pu

1. Describe the similarities and differences in between an ordinary annuity, an annuity due, and perpetuity.  Provide a methodical answer, including examples to demonstrate your po

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

1. A stock pays no dividend and is expected to be sold for $50 after 4 years. If the investor's RRR is 12%, at what price is he/she willing to buy it? 2. ABC company has its ROE


Example of NPV Method Resolution limited intends to purchase a machine worth Shs.1, 500,000 that will have a residue value Shs.200,000 after 5 years helpful life. The saving