Global Logistics corp. has forecasted dividends for the next two years as follows. The company's cost...
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Global Logistics corp. has forecasted dividends for the next two years as follows. The company's cost of equity capital is expected to be 11%. Cash dividends per share 2024 $3.10 2025 $3.50 Required: (a) Calculate the intrinsic value of the stock, assuming a constant growth of 2% for the dividend in 2025 extending to infinity. (2 pts.) (b) Given that the current market price of the stock $25, assess whether it is advisable for an investor to invest in Global Logistics Corp based on the intrinsic value calculated in part (a). (1 pt.) (c) Suppose that the current market price of the stock is $33. If you hold the stock for one year, you get a dividend of $3.10 and you expect to sell the stock for $35. Explain whether you will be willing to buy the stock today. (2 pts.) Global Logistics corp. has forecasted dividends for the next two years as follows. The company's cost of equity capital is expected to be 11%. Cash dividends per share 2024 $3.10 2025 $3.50 Required: (a) Calculate the intrinsic value of the stock, assuming a constant growth of 2% for the dividend in 2025 extending to infinity. (2 pts.) (b) Given that the current market price of the stock $25, assess whether it is advisable for an investor to invest in Global Logistics Corp based on the intrinsic value calculated in part (a). (1 pt.) (c) Suppose that the current market price of the stock is $33. If you hold the stock for one year, you get a dividend of $3.10 and you expect to sell the stock for $35. Explain whether you will be willing to buy the stock today. (2 pts.)
Expert Answer:
Answer rating: 100% (QA)
a To calculate the intrinsic value of the stock we can use the Gordon Growth Model also known as the Dividend Discount Model DDM The formula for the i... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
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