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 operating cash flow, What are the missing amounts for the below a...

What are the missing amounts for the below amortization table, given the following information? -  A firm borrows $100,000 from a bank. -  The terms of the loan require the f

Please provide a recommendation, Your client has asked you to evaluate an i...

Your client has asked you to evaluate an investment project for her using what you have learned in school regarding the net present value method. The project will run for eight yea

Please show you calculation and explain the answer, In early July, Mike Got...

In early July, Mike Gottfried purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors

Find out the memorandum reconciliation account, Find Out the Memorandum Rec...

Find Out the Memorandum Reconciliation Account The givens are the final accounts of a company for the year ending on date 31st December 1999. Manufacturing Trading Loss and Pr

Working capital accounts, Determine the additional cash a company could obt...

Determine the additional cash a company could obtain from its working capital accounts if it can improve its average collection period by three days and inventory turnover by 0.5 t

Comment on the cash- flow impacts, Chester & Wayne is a regional food distr...

Chester & Wayne is a regional food distribution company. Mr. Chester, CEO, has asked your assistance in preparing cash-flow information for the last three months of this year. Sele

Estimating, how do you calculate estimating cost for the last of the year b...

how do you calculate estimating cost for the last of the year based on activity during the first half of the year

Variance analysis and standard costing, Variance Analysis and Standard Cost...

Variance Analysis and Standard Costing Standard costing is defined with CIMA like a technique that uses standards for revenues and costs for the purpose of control via varianc

Determine the total cost and product costing method, Question Hornsby M...

Question Hornsby Manufacturing has four categories of overheads. The four categories and the expected overhead costs for each category for next year are as follows:

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