Question
Youve collected the following information from your favorite financial website. 52-Week Price Stock (Div) Div Yld % PE Ratio Close Price Net Chg Hi Lo
Youve collected the following information from your favorite financial website.
52-Week Price | Stock (Div) | Div Yld % | PE Ratio | Close Price | Net Chg | |
Hi | Lo | |||||
77.40 | 10.43 | Palm Coal .36 | 2.6 | 6 | 13.90 | .24 |
55.81 | 33.42 | Lake Lead Grp 1.54 | 3.8 | 10 | 40.43 | .01 |
131.12 | 70.45 | SIR 2.95 | 3.3 | 10 | 89.16 | 3.07 |
50.24 | 13.95 | DR Dime .80 | 5.2 | 6 | 15.43 | .26 |
35.00 | 20.74 | Candy Galore .32 | 1.5 | 28 | ?? | .18 |
According to your research, the growth rate in dividends for SIR for the next five years is expected to be 21 percent. Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent indefinitely. Assume investors require a return of 15 percent on SIR stock.
According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) please explain each step and how you got the answer. Thank you Current stock price $
Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?
Overvalued
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