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

Prepare a report for profitability of a company, The following information ...

The following information has been prepared for XYZ Ltd by their assistant accountant. The risk free rate of interest on government securities in 2008 is 7.3% Required:

Determine the current profits, Two firms compete in a homogenous product ma...

Two firms compete in a homogenous product market where the inverse demand function is P = 10 - 2Q (quantity is measured in millions). Firm 1 has been in business for 1 year, while

Assessment item 2, rocess costing Prepare a spreadsheet to solve the follow...

rocess costing Prepare a spreadsheet to solve the following process costing problem. Review the four process costing videos provided in Interact Resources. Note that in the situati

Calculate the cost per unit for products, Chemical Recovery Company uses co...

Chemical Recovery Company uses common machinery to manufacture two products.  Each year, the company has a total of four productions runs, which is two production runs for each pro

Test accounting of monetary instruments, This question tested the accountin...

This question tested the accounting of monetary instruments, especially an asset held at reasonable value through loss or profit. The preparation of the journal for subsequent and

Typical causes of labour variances, Typical Causes of Labour Varian...

Typical Causes of Labour Variances Labour Rate Variances a) Higher rates being paid than planned because of wage raise awards. b) Lower or Higher grade of work

Direct materials budget, Direct Materials Budget This budget implies t...

Direct Materials Budget This budget implies the estimated quantities and costs of every the raw materials and components desired for the output demand by the production budget

Accelerated cost recovery system - acrs, ACRS is a system of depreciation s...

ACRS is a system of depreciation started by the Economic Recovery Tax Act of 1981. ACRS depreciation relies on recovery periods in spite of useful life. These periods were preset b

Labour, what is rowan incentive system

what is rowan incentive system

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