What should the value of the stock be

Assignment Help Financial Management

Reference no: EM131020843

a. The last dividend was $2.50, but now is expected to grow at 10% forever, and Ke remains 25%, what would the price be now?

b. Things are not as great as originally thought. The last dividend was $2.50. It is expected to grow by 10% for only the next 3 years, but then decline to 5% and stay at that rate forever after. The Ke remains 25%. What should the value of the stock be?

Reference no: EM131020843

Questions Cloud

Coupon bonds on the market with fifteen years : A management company has 10 percent coupon bonds on the market with fifteen (15) years left to maturity. The bonds make annual payments. If the bond currently sells for $1,200, what is its YTM?

What is the current share price : Gruber Corp. pays a constant $7.10 dividend on its stock. The company will maintain this dividend for the next 10 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share price?

Rapid growth-what is projected dividend for coming year : Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 28 percent per year during the next three years, 18 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 11 perce..

Dividends are expected to grow at rates-current share price : Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent and the company just paid a divi..

What should the value of the stock be : The last dividend was $2.50, but now is expected to grow at 10% forever, and Ke remains 25%, what would the price be now? Things are not as great as originally thought. The last dividend was $2.50. It is expected to grow by 10% for only the next 3 y..

Line of credit to fill temporary cash shortfalls : Which of the following financial ratios/percentages would be the most likely reason for a bank to NOT approve a company’s application for a line of credit to fill temporary cash shortfalls?

Record the correcting entry for errors discovered : Prepare the appropriate correcting entry assuming the error was discovered in 2016 before the adjusting and closing entries. (Ignore income taxes.)

What is the total amount of interest that will pay : Jeff buys a house for $220,000. He makes a 10% down payment and nances the remaining balance with a 15 year mortgage. The annual interest rate is 2.875% and interest is compounded monthly. What is the total amount of interest that Jeff will pay?

Additional notes payable and use them to increase inventory : The Nelson Company has $1,000,000 in current assets and $400,000 in current liabilities. Its initial inventory level is $200,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term..

User Account

All Pages