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
Download a set of financial statements "Creative Technology Ltd" From that set of Financial Statements. IN YOUR OWN WORDS, understand what the main revenue  streams of the business

what is the applicability of a financial cycle to poultry?

Stewardship Accounting Shareholders contribute capital that is provided to the directors that they employ and at the end of each accounting year render an explanation on the a

Pursuing self esteem ambitions and Creative Accounting Pursuing power and self esteem ambitions This is called "empire building" to enlarge the firm via acquisitions and me

Explain Mechanics of security trading in Stock Exchange Introduction: An investor should have some knowledge of how the securities markets operate. Marketing of old or new se

Advantages of Residual Theory 1. Saving on floatation costs No require to raise debt or equity capital as there is high retention of earnings that necessitates no floatat

Shareholders and Management There is near separation of ownership and management of the firm. Landlord employs professionals as managers who such have technical skills. Manage

Interest Rate Levels and Stock Prices Interest rates contain two effects on corporate profits: a) Since interest rate is a cost, and like the higher the rate of interest the


State the Determinants of Return Three major determinants of the rate of return expected by investor are: (i) Time preference risk-free real rate. (ii) Expected rate o