Dividend is fixed-what is the value of the stock

Assignment Help Financial Management
Reference no: EM131575588

You own a stock that you are considering selling. The current dividend is $1.10/share. Your required return for this stock is 7%. The current market price of the stock is $23.50. Consider each of the following situations separately.

If the dividend is fixed, what is the value of the stock? Should you sell it?

If the dividend grows at 2% indefinitely, what is the value of the stock? Should you sell it?

If the dividend grows at 5% for the first two years and then 2% indefinitely, what is the value of the stock? Should you sell it?

Reference no: EM131575588

Questions Cloud

What is your best estimate of the company cost of equity : If the stock sells for $40 per share, what is your best estimate of the company's cost of equity?
Assume the company tax rate : Market: 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 33 percent. Find the WACC.
How large of a sales increase can the company achieve : How large of a sales increase can the company achieve without having to raise funds externally?
What is the dominant business for discovery communications : What is the dominant business for Discovery Communications, Inc. How much revenue does the dominant business of Discovery Communications, Inc generate?
Dividend is fixed-what is the value of the stock : If the dividend is fixed, what is the value of the stock? Should you sell it? If the dividend grows at 2% indefinitely, what is the value of the stock?
Calculate value of european call option with strike price : Using a tree diagram calculate the value of the European Call option with a strike price of 100?
Terms of bond equates the forward contract present value : Using the above information show that the value of a swap in terms of bond equates the forward contract present value.
Most cases the numbers for present value of cash flows : How do u get the Present value of interest numbers and in most cases the numbers for present value of cash flows
Electrical utility is offering security : Electrical utility is offering a security, known as zero-coupon bond, for sale.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the yield to maturity at current market price

The Brownstone Corporation's bonds have 4 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. What is the yield to maturity at a current market price of $887? What is the yie..

  Equal the purchasing power of her current earnings

A client is concerned about the impact that inflation will have on her retirement income. The client currently earns $40,000 per year. Assuming that inflation averages 2.25% for the first five years, 2.5% for the next five years and 3.25% for the rem..

  How much new long-term debt financing

How much new long-term debt financing will Esther's need this year to finance it's expected growth?

  What is effective annual interest rate of trade for credit

Company needs to raise $400,000for one year to supply working capital to a new store. Buts from supplier on terms 2/10 net 90and it's currently pay on tenth day. Forgo discount pay on 90th day and get the $400,000 needed to form costly trade credit. ..

  Probability of favorable ruling implied by stock price

What is probability of a favorable ruling implied by the stock price and the two possible outcomes after the announcement?

  Project to demolish an existing library in your town

You are the project manager for a project to demolish an existing library in your town and construct a new library in its place.

  Consider the multiple definitions of collaboration

Consider the multiple definitions of collaboration.

  What is ratio of market value of equity to its book value

A firm has current assets that could be sold for their book value of $40 million. The book value of its fixed assets is $78 million, but they could be sold for $108 million today. The firm has total debt with a book value of $58 million, but interest..

  Demonstrate a good understanding of the issues involved

`A market is efficient with respect to a particular set of information if it is impossible to make abnormal profits by using this set of information to formulate buying and selling decisions.'

  Compute the wacc and then compute the debt

First compute the WACC, then compute the debt as 25% of the WACC value, and show how the APV yields the same result.

  Various types of financing costs and debt-to-equity ratio

Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans: Cost (aftertax) Weights Plan A Debt 6.0 % 25 %. Which of the four plans has the lowest weighted average cost of..

  Direct cost of bankruptcy

Which of the following is not a direct cost of bankruptcy?

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