Constant Dividend Growth Model Assume a stock has dividends that grow at a constant rate forever. If
Question:
Constant Dividend Growth Model Assume a stock has dividends that grow at a constant rate forever. If you value the stock using the constant dividend growth model, how many years worth of dividends constitute one-half of the stock’s current prices?
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 57% (14 reviews)
Even though the question concerns a stock with a constant growth rate we need to begin with the equation for twostage growth given in the chapter which is We can expand the equation see Problem 26 for more detail to the following Since the growth rate is constant g ...View the full answer
Answered By
Somshukla Chakraborty
I have a teaching experience of more than 4 years by now in diverse subjects like History,Geography,Political Science,Sociology,Business Enterprise,Economics,Environmental Management etc.I teach students from classes 9-12 and undergraduate students.I boards I handle are IB,IGCSE, state boards,ICSE, CBSE.I am passionate about teaching.Full satisfaction of the students is my main goal.
I have completed my graduation and master's in history from Jadavpur University Kolkata,India in 2012 and I have completed my B.Ed from the same University in 2013. I have taught in a reputed school of Kolkata (subjects-History,Geography,Civics,Political Science) from 2014-2016.I worked as a guest lecturer of history in a college of Kolkata for 2 years teaching students of 1st ,2nd and 3rd year. I taught Ancient and Modern Indian history there.I have taught in another school in Mohali,Punjab teaching students from classes 9-12.Presently I am working as an online tutor with concept tutors,Bangalore,India(Carve Niche Pvt.Ltd.) for the last 1year and also have been appointed as an online history tutor by Course Hero(California,U.S) and Vidyalai.com(Chennai,India).
4.00+
2+ Reviews
10+ Question Solved
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
Question Posted:
Students also viewed these Corporate Finance questions
-
Assume a stock has dividends that grow at a constant rate forever. If you value the stock using the constant dividend growth model, how many years worth of dividends constitute one-half of the stocks...
-
Assume a stock has a value of $100. The stock is expected to pay a dividend of $2 per share at year-end. An at-the-money European-style put option with one-year maturity sells for $7. If the annual...
-
Using the Gordon growth model of stock prices, what is the price of a share of stock with an initial dividend equal to $6, if dividends grow at 2 percent and the interest rate is 5 percent? A) $200...
-
What are the three main ways in which interest groups use the courts to affect public policy? Discuss one example of a successful use of the courts by an interest group.
-
Two small rubber balls are dropped from rest at a height h above a hard floor. When the balls are released, the lighter ball (with mass m) is directly above the heavier ball (with mass M). Assume the...
-
Explain why outbound logistics systems in some organizations are viewed as more important than inbound logistics systems?
-
What are some of the national similarities and differences in performance evaluation techniques?
-
In a discussion between Peters and Ferrel, two auditing students, Peters made the following statement: A CPA is a professional person who is licensed by the state for the purpose of providing an...
-
Chapter 1 The Reckoning Questions: Describe the earliest forms of accounting. How were accounting, morals and politics intertwined? What was one of the substantial limitations of Roman accounting,...
-
An experiment was conducted regarding a quantitative analysis of factors found in high-density lipoprotein (HDL) in a sample of human blood serum. Three variables thought to be predictive of, or...
-
Non constant Growth this ones a little harder. Suppose the current share price for the firm in the previous problem is S60.98 and all the dividend information remains the same. What required return...
-
Two-Stage Dividend Growth Regarding the two-stage dividend growth model in the chapter, show that the price of a share of stock today can be written as follows: Can you provide an intuitive...
-
Find the value of the determinant. 1 4 4 0 -1 2 6 4 1 3
-
Psychology is made of different branches. Explain Abnormal psychology as a branch of psychology.
-
Identify the formulas for the following: FC, VC, TC, MC, AFC, AVC, ATC. Fill out the table, round to integers (no decimal places) Output FC VC TC MC AFC AVC ATC 0 1 2 3 4 5 6 7 8 9 8165 10 50 100 25...
-
2. In the country of SpringNow, the public is holding a total of $2,000. Total lending in the banking sector, which has 5 identical banks, is $30,000. The currency deposit ratio is 5%. (a) Describe...
-
Select one topic from abnormal psychology that helped change your understanding. Explain your previous knowledge of this concept and how this course has helped you to see this concept in new ways. ...
-
Billy purchased 100 shares of LMN stock for $14 per share. A few months later, he sold one LMN Nov 18 call for a premium of $2. Billy was assigned when the stock traded at $20 per share. What is his...
-
The final closing entry for a proprietorship is: a. Owner, Withdrawals.............. XXX Owner, Capital............ XXX b. Owner, Capital............ XXX Owner, Withdrawals.......... XXX c. Sales...
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
Miker, a manufacturer of generic medications, is deciding how much to charge retailers for their generic acetaminophen. The marginal cost for each bottle is provided in the accompanying table. If the...
-
Stock Y has a beta of 1.25 and an expected return of 12.6 percent. Stock Z has a beta of .8 and an expected return of 9.9 percent. If the risk-free rate is 4.1 percent and the market risk premium is...
-
You own a portfolio that has $1,300 invested in Stock A and $2,100 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected...
-
You have $250,000 to invest in a stock portfolio. Your choices are Stock H, with an expected return of 13.5 percent, and Stock L, with an expected return of 9.8 percent. If your goal is to create a...
-
At January 1, Year 1, Brooks Company had total assets of $1,800,000 and at December 31, Year 1, its total assets were $2,200,000. Brooks' net sales for Year 1 were $3,700,000 and its Year 1 net...
-
Algunas acciones a desarrollar en las entregas certificadas son: Puede seleccionar ms de una opcin. Grupo de opciones de respuesta Reducir manipulacin excesiva Despacho Transporte Comunicaciones de...
-
PRACTICE EXERCISE 161. Record the following payment transactions for Letzelter Co. of Saint John,NB, during the month of November. Set up a Cash Payments Journal(page CP6) with these headings: Date,...
Study smarter with the SolutionInn App