Calculate the current stock price, Cost Accounting

Assignment Help:

The Bloomington Electric Company operates in a stable industry and therefore has predictable dividend growth of 8% per year. The most recent annual dividend was paid yesterday in the amount of $4. Assume the appropriate discount rate is 15%.

What is the current stock price?

Assuming the annual growth rates for the next three years is 20% each year; but starting the fourth year and after the growth rate remains constant at 8%. What is the current stock price under this scenario?
Assuming a dividend growth rate of 8%, what is the dividend yield of this stock if the current stock price is $40?

Answer

a) Current Stock Price=Dividend Received/Dividend Growth Rate =4/.08 =50

Year	Dividend	D.F	PV
1	4.8	0.869565	4.173913
2	5.76	0.756144	4.355388
3	6.912	0.657516	4.544752
4	86.4	0.571753	49.39948
			62.47353

b) ividend for infinite stream at 8% from 4^th year =Dividend of that year /Rate of dividend

=6.91/.08

=86.4

c) Dividend Yield =Dividend Received/Stock Price

=4/40

=10%

Related Discussions:- Calculate the current stock price

classification of cost, what is classification of cost

what is classification of cost?

Cost estimation methods, using the high low method how do i calculate the c...

using the high low method how do i calculate the costs that are expected when the output expected is out of the range given for example cost prdctn volume 110000

British Columbia Lumber has a Raw Lumber Division, British Columbia Lumber ...

British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division. The variable costs are: 1.Raw Lumber Division: Rs. 100 per 100 board-feet of raw lumber 2.F

Cash flow statement, Keyser Beverage Company reported the following items i...

Keyser Beverage Company reported the following items in the most recent year. Net income $40,630 Dividends paid 5,390 Increase in accounts receivable 12,130 Increase i

Advantages of standard costing, Advantages of Standard Costing 1. Man...

Advantages of Standard Costing 1. Management via Exception: the standard costing is an example for management via exception. By studying the variances, management's attentio

Operating cost.., procedure,advantages ..

procedure,advantages ..

Costs and revenues over a range of activity levels, 1. Single product or si...

1. Single product or single mix of products 2. Variable cost, fixed cost and selling price are constant 3. The level of production will equal the level of sales Example:

Motivation - behavioural aspects of standards, Motivation - Behavioural Asp...

Motivation - Behavioural Aspects of Standards Variance analysis and standards setting requires to be carried out like it motivates managers and other employees. It should not

Which of the following are relevant in choosing, A company is considering t...

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $240,000 240,000 Variable costs 120,000 140,000 Fixed costs 70,000 70,000 Which of the fol

Usefulness of variance analysis, Usefulness of Variance Analysis Caref...

Usefulness of Variance Analysis Carefully note that while prices are being charged to production, it can be done at the actual or standard price. For purposes of making varian

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages