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?

  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%


Related Discussions:- Calculate the current stock price

Determine a simplified single cost allocation rate, When implementing ABC, ...

When implementing ABC, once a company has identified business activities and their costs, the company will probably: A) determine a simplified single cost allocation rate B)

Segment reporting, Juniper Ltd is a listed diversified company.  In prepari...

Juniper Ltd is a listed diversified company.  In preparing its financial statements in accordance with AASB 8, the chief operating officer has identified three operating segments:

Planning, what is planning and what part of this activity would you describ...

what is planning and what part of this activity would you describe as planning in the situasion above

Calculate the reduction in failure costs per unit, Each unit of a product r...

Each unit of a product requires four components. The average number of components is 4.25 due to component failure. Purchasing higher quality components can reduce the average numb

What will be their allocated overhead?, Tyler's Consulting Company has purc...

Tyler's Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those a

Inventory systems, Find a journal article online about just-in-time invento...

Find a journal article online about just-in-time inventory systems. In the subject line of your post, include the title of the article that you read. Post a link to that article wi

Cost accounting, diff between cost estimation and cost accounting

diff between cost estimation and cost accounting

Illustration of overhead variance analysis, Illustration of Overhead Varian...

Illustration of Overhead Variance Analysis Again for intentions of our demonstrations in overhead variance analysis, we will suppose the given basic data for company in the pr

Income received in advance, This is the income received but not earned thro...

This is the income received but not earned throughout the accounting period. Conversely, this is the income for those services are to be rendered in future. Such income is deducted

Relationship among variances, Relationship among variances We cannot o...

Relationship among variances We cannot over emphasize the central aim of variance analysis as outlined in the above paragraphs:  that is to assign responsibility for a particu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd