Use Excel for this question: A company announced that it will pay a $2.00 dividend, a $2.50 dividend, and a $3.70 dividend in years 1, 2, and 3, respectively. year 3, the dividends are expected to grow at 6% every year. What is the price of this stock today, given an 7% rate of return? O $327.23 O $342.34 O $311.46 O $389.76
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- Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?Start with the partial model in the file Ch07 P27 Build a Model.xlsx on the textbook’s Web site. Hamilton Landscaping’s dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%. What is Hamilton’s estimated stock price today? If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year? What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why aren’t these the same as for the first year?
- NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40. After year 2, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 9%. The stock should be worth today. Select one: O a. $73.37 O b. $79.63 O c. $67.32 O d. $73.211. An analyst estimates that a stock will pay a $1 dividend next year and that it will sell for $40 at year-end. If the required rate of return is 14%, what is the value of the stock? A. $34.60. B. $35.52. C. $35.96.Suppose Lilly V, Inc. has just paid a dividend. The next dividend, to be paid in a year, is forecasted to be $4. If the growth rate of dividends is 7% and the discount rate is 11%, at what price will the stock sell? a.Less than $100 b.More than $100 c.$100 d.$111
- Give typing answer with explanation and conclusion ABC,. Inc just paid a dividend of $3.65. The dividends are expected to grow by 15% in Years 1-3. After that, the dividends are expected to grow by 1% each year. If the required rate of return is 13%, what is today's price of the stock?If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11Suppose Barclay Corp is expected to pay a dividend of $2.50 at the end of the year. f the company and its dividends are growing at a relatively constant rate of 3.5% and Investors required return on the stock is 10.2%, what is the value of the stock? O$37.31 O $24.47 O$25.37 O $24.51 O$38.62 Page 13 of 30 Previous Page Next Page 0gf30.guestions.saved.
- Etling Inc.'s dividend is expected to grow at 8% for the next two years and then at 3% forever. If the current dividend is $3 and the required return is 15%, what is the price of the stock? Select one: O a. $26.00 Ob. $28.17 OC. $25.54 O d. $27.58 e. $25.10 BOrwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 27.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price? Select the correct answer. a. $43.98 b. $45.08 c. $44.53 d. $46.18 e. $45.63Consider a stock that will have dividend growth rates in the next three periods of 13%, 9%, and 4%, respectively. The third growth rate remains forever. The company just paid a dividend, D0, of $1.285. The interest rate is 12%. How much are the dividends in periods 1, 2, and 3? Enter your answers rounded to 2 DECIMAL PLACES. D1 = 1.45 Correct response: 1.45\ pm 0.01 D2 = 1.58 Correct response: 1.58\pm 0.01 D 3 = 1.65 Correct response: 1.64\pm 0.01 Click "Verify" to proceed to the next part of the question. Using 1.64 as the dividend in period 3, what is the price of the stock at time 2? Enter your response below rounded to 2 DECIMAL PLACES. Number Click "Verify" to proceed to the next part of the question.