Question
1. In the next five years, the annual dividends of a stock are expected to be $2.0, $2.1, $2.2, $3.5, and $3.75. In addition, the
1. In the next five years, the annual dividends of a stock are expected to be $2.0, $2.1, $2.2, $3.5, and $3.75. In addition, the stock price is expected to be $40.00 in five years. If the discount rate is 10%, what is the current value of the stock? Write down the formula and use the NPV function in your calculator to solve for the stocks value.
2. A company recently paid a dividend of $1.8. An analyst examines the financial statements and historical dividend policy of the company and expects that the firms dividend will grow at a constant rate of 3.5% indefinitely. The analyst also determinesthe discount rate is 10%. Calculate the current value of the companys share.
3. A firm currently pays a dividend of $1.22, which is expected to grow indefinitely at 5%. If the current value of its shares based on the constant-growth dividend discount model is $32.03, what is the discount rate?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started