What value would be placed on a stock that currently pays no dividend but is expected to start paying a $1 dividend five years from now? Once the stock starts paying dividends, the dividend is expected to grow at a 5 percent annual rate. The appropriate discount rate is 12 percent. A) $14.29. (B) $8.11. C) $9.08.

What value would be placed on a stock that currently pays no dividend but is expected to start paying a $1 dividend five years from now? Once the stock starts paying dividends, the dividend is expected to grow at a 5 percent annual rate. The appropriate discount rate is 12 percent. A) $14.29. (B) $8.11. C) $9.08.

Name: What value would be placed on a stock that currently pays no dividend
Uploaded: 2024-03-20T06:51:32.000Z
Channel: Bartleby
Description: What value would be placed on a stock that currently pays no dividend but is expectedto start paying a $1 dividend five years from now? Once the stock starts payingdividends, the dividend is expected to grow at a 5 percent annual rate. The appropria

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

EMKA corporation is going to pay a dividend of $1.5, $2, and $2.5 each year for the next three years. Afterwards, it is planing to increas the dividends at a constant rate of 10% indifinitely. How much should the stock be sold for if the required rate of return is 12%? Select one: a.$104.17 b.$102.59 c.$100.01 d.$105.64
b) Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of Year 1?
How much would you be prepared to pay for a share in two years' time when it begins to pay a $0.17 dividend each year and is currently priced at $3? Assume the required rate of return is 8.5% p.a.
Best Corporation is expected to pay $.60 next year and $1.10 the following year and $1.25 each year thereafter. If the required return is .14, what is the priice of the stock? $7.40 $2.95 $8.24 $2.22
Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. i) Compute the current stock price for Whizcom Inc.ii) What would be the likely stock price in year 5?iii) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
A stock will pay a dividend next quarter of $1.00. If the expected return is 10% per year, compounded annually, what is the price of the stock? Suppose a stock will pay $0 for the next 4 years, and then pay $1 every quarter after that. The required return is 10% per year, compounded annually. What is the price of the stock? Suppose a stock will pay $0.50, $1.00, $1.50, $2.00 and then grow at 4% per year compounded quarterly. The required return is 10% per year compounded annually. What is the price of the stock?
An irredeemable preference stock will pay a dividend of Shs.6 next year. The dividend is expected to grow at 8% p.a. for the next 2 years, then indefinitely at 4% per year. If the discount rate is 12%, what is the present value of this stream?
2. Preferred Products has issued preferred stock with an $8 annual dividend that will be paid in perpetuity. a. If the discount rate is 12%, at what price should the preferred sell? (Round your answer to the nearest cent.) b. At what price should the stock sell one year from now? (Round your answer to the nearest cent.) c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock? (Round your answer to the nearest whole number. If no entry is required, please, enter zero ("0").)
The Highest Potential, Inc., will pay a quarterly dividend per share of $1 atthe end of each of the next 12 quarters. Subsequently, the dividend willgrow at a quarterly rate of 0.5 percent indefinitely. The appropriate rateof return on the stock is 10 percent. What is the current stock price?
The FI Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) Amount % per share
A company has an issue of preferred stock outstanding that pays a $2.30 dividend every year in perpetuity. If this issue currently sells for $41.82 per share, what is the required rate of return? Please use a HP 10bii+ Financial Calculator
NTT Corp is expected to pay a $2.80 annual dividend to its common shareholders next year. Analysts expect these dividends to grow indefinitely at a 6.5 percent annual rate. If the required rate of return on the common stock is 10.8 percent, what is the intrinsic value of the common stock? a. $56.28 b. $61.44 c. $65.12 d. $69.35