Calculate the current stock price, Cost Accounting

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?

  1. 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?
  2. 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

  b)

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 4th year =Dividend of that year /Rate of dividend

                                                                                        =6.91/.08

                                                                                        =86.4

c)      Dividend Yield =Dividend Received/Stock Price

                          =4/40

                          =10%

Posted Date: 3/12/2013 6:17:02 AM | Location : United States







Related Discussions:- Calculate the current stock price, Assignment Help, Ask Question on Calculate the current stock price, Get Answer, Expert's Help, Calculate the current stock price Discussions

Write discussion on Calculate the current stock price
Your posts are moderated
Related Questions
Purpose of Cost Estimation In estimating it assists the future expenditure as cost prediction like the expenditure will depend upon the cost of the respective activities a)

One month before she died on April 14, 2002, Barbara Gent (Amy's aunt) gave Amy a coin collection. Based on careful records that Barbara kept, the collection had a cost basis of $9

The credit term from the supplier is 2/30, net 60. Requirements: Write the calculation Determine the effective annual rate if the firm does not take the discount.

A Government issued a number of index-linked bonds on 1 June 2000 which were redeemed on 1 June 2002.  Each bond had a nominal coupon rate of 3% per annum, payable half yearly in a

Operation and Design of Cost Accounting Systems A number of features should be taken into account previously to finalizing the design of a cost and management accounting syste

One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store manager must determine when to replenish it

NSC Ltd. has a 31 May fiscal year-end. NSC disposed of its Information Systems Group (ISG) on 31 January 20X3. ISG had a net loss (after taxes) of $37,700,000 in 20X3, to the date

General Motors has to raise new capital in one of the following three ways. Using the income tax rate of 32%, find the after-tax cost of new capital in each case. (A) Sell commo

behavioral aspect of standard costing

CONTRIBUTION : It is the variation between the marginal cost of sales and sales and it contributes towards fixed profit and expenses.  It is differ from the profit which is the net