Calculate the current value of the stock

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Questions -

Q1. Analysts expect its annual dividend to be $2.00 in the next year (i.e., Div1=$2.00 ) and then the dividend growth rate will be 3% per year thereafter in perpetuity. The required rate of return in the stock is 7%. Calculate the current value of the stock.

Q2. Northwest Natural has a fixed dividend payout ratio of 90%, current ROE is about 7% and dividend yield is 1.9%. Given this information, what estimate would you use as the dividend growth rate and expected return (discount rate, or r)?

Q3. Here is a (very) simplified balance sheet for Northwest Natural as of Dec 31, 2020, reported on its annual statement (fiscal year 2020)

Q4. The firm's market value of debt was $1.3 billion and market value of equity was $1.5 billion. The company's cost of equity is estimated to be 6.5% and the market risk premium was 7%. If the Treasury bill rate was 2.5%, the current yield-to-maturity of the company's bond was 5.0% and the coupon rate of the company's bond was 3%. Assume corporate tax rate was 21%, estimate the WACC (i.e., the company cost of capital)?

Reference no: EM133079313

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