Question
Youve collected the following information from your favorite financial website. 52-Week Price Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change Hi Lo
Youve collected the following information from your favorite financial website.
52-Week Price | Stock (Dividend) | Dividend Yield % | PE Ratio | Close Price | Net Change | |
---|---|---|---|---|---|---|
Hi | Lo | |||||
77.40 | 10.43 | Acevedo .36 | 2.6 | 6 | 13.90 | .24 |
55.81 | 33.42 | Georgette, Incorporated 1.54 | 3.8 | 10 | 40.43 | .01 |
131.06 | 70.15 | YBM 2.65 | 3.0 | 10 | 89.10 | 3.07 |
50.24 | 13.95 | Manta Energy .80 | 5.2 | 6 | 15.43 | .26 |
35.00 | 20.74 | Winter Sports .32 | 1.5 | 28 | ??question mark | .18 |
According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.25 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?
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