What is your estimate of the stocks current price

Assignment Help Financial Management

Reference no: EM13850750

Nonconstant Growth Valuation

A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, then at a constant rate of 8% thereafter. The company's stock has a beta of 1.25, the risk-free rate is 5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Round your answer to the nearest cent.

Reference no: EM13850750

Questions Cloud

Constant growth rate and g : A stock is trading at $75 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15% (assume the market is in ..

Jessica is planning to sell a bond : Jessica is planning to sell a bond that she bought 6 years ago and at the time it had 10 years to maturity. The bond has a $1000 face value and pays a coupon of 10% on a semiannual basis. Similar bonds in the current market will nominally yield 12%. ..

Treasury bill-reasonable annualized risk-free rate : Suppose that US Treasury Bills have seven days left until maturity, have a face value of $75,650, and have a quoted YTM of 5%. What would be a reasonable annualized risk-free rate that could be derived from this US Treasury Bill?

Value of operations of constant growth firm : EMC Corporation has never paid a dividend. Its current free cash flow of $500,000 is expected to grow at a constant rate of 5.9%. The weighted average cost of capital is WACC = 14.75%. Calculate EMC's estimated value of operations.

What is your estimate of the stocks current price : A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, then at a constant rate of 8% thereafter. The company's stock has a beta of 1.25, the..

Equilibrium with required return equal to expected rerurn : Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $3 at the end of each year. The preferred sells for $45 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required..

Constant growth valuation-estimated required rate of return : Woidtke Manufacturing's stock currently sells for $30 a share. The stock just paid a dividend of $4.00 a share (i.e., D0 = $4.00), and the dividend is expected to grow forever at a constant rate of 10% a year. What stock price is expected 1 year from..

Bymaking deposits of x into an investment account : (1) You want to accumulate $1,000,000 over the next 10 years. You intend to do this bymaking deposits of X into an investment account at the end of each month, for 30 years.The account earns i(4)= 10%. Find X.(2) A 30-year annuity pays $1,000 semiann..

Compute the cost of capital for the firm : Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.5 percent. Interest payments are $52.50 and are paid semiannually. The bonds have a current marke..

User Account

All Pages