Review problem related to the stock valuation

Assignment Help Finance Basics
Reference no: EM131731270

Question: Stock Valuation. Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders.

a. Suppose a company currently pays an annual dividend of $2.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6 percent per year indefinitely. If the required return on this stock is 12 percent, what is the current share price?

b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.55 per share, as it has for the previous three quarters. What is your value for the current share price now?

Reference no: EM131731270

Questions Cloud

A client who was involved in a motor vehicle accident comes : A client who was involved in a motor vehicle accident comes into the ER distraught and complaining of leg pain
What effect slowing chinese economy on economy of canada : What will be the effect slowing Chinese economy on the economy of Canada and the Canadian dollar? Use the DD/AA model to explain and graph your answers
Tapping application payment system : Tapping Application Payment System - which is a device-to-device tap technology that takes the card payment machine out from the system is proposed
Personality theories in the psychodynamic tradition : Personality Theories in the Psychodynamic Tradition Prior to beginning work on this discussion.
Review problem related to the stock valuation : Stock Valuation. Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances.
Different methods for resolving contractual disputes : There are different methods for resolving contractual disputes. From the following list of resolution methods, which is least adversarial?
What is the required return for exxonmobil : Dividend Discount Model. According to the 2015 Value Line Investment Survey, the dividend growth rate for ExxonMobil (XOM) is 6 percent.
What principals set out by the hrpa-chrp code of ethics : What principals set out by the HRPA/CHRP code of ethics or other Human Resources Professional organization apply in this situation?

Reviews

Write a Review

Finance Basics Questions & Answers

  Discount terms-price and ytm of bond

Find out the Current Price and Yield to Maturity of 8% semi-annual coupon bond if it has a current yield of 9.3% and matures in 10 years?

  Why the trend or changes happened

Read the article Mall Owners Push Out Department Stores. Why the trends/changes happened? Recommendation for mall owners/department stores/retailers.

  Establish the facts and determine the issues

Establish the facts and determine the issues. -  Locate the relevant authorities. -  Assess the importance of the authorities.

  Company checkpoint issued bonds

Company Checkpoint issued bonds at a discount where each $1,000 face(par) bond was issued for $900. The coupon rate is stated as 3.75%. Company Delta issued its bonds at par(each $1,000 of bond was issued for $1,000) with a coupon rate of 4%. As a..

  Frame a risk management strategy

Describe how stress testing can help frame a risk management strategy. Research a company and provide an example of stress testing process.

  Calculate the initial price-new price

A-rated bonds sell at yields of 6.3%. Assume a 10-year bond with a coupon rate of 5.5% is downgraded by Moody's from Aa to A rating. Calculate the initial price. Calculate the new price.

  Capital budgeting project

El Dorado Storage has the following projections for Year 1 of a capital budgeting project.

  What is the value of this endowment in today dollars

The first $4M will start today; at the end of 5 years, the hospital will also receive a lump sum payment of $18M. Assuming the cost of money is 3%, what is the value of this endowment in today's dollars?

  Why do venture capitalists make quick decisions

Why do venture capitalists make quick decisions on the infeasibility of some business plans? When a business plan is not quickly determined to be infeasible, what happens next and why?

  Use the du pont system to calculate the return on assets

Insert the appropriate dollar amounts wherever possible. c. Use the Du Pont system to calculate the return on assets for the two years, and determine why they changed.

  Determine expected rate of return and standard deviation

Stock A has the given probability distribution of expected returns. Determine Stock A's expected rate of return and standard deviation?

  Discuss several pieces of legislation that were enacted

Discuss several pieces of legislation that were enacted to protect against unethical investing practices. Charts and graphs should be used where appropriate.

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