Calculate the price of a share

Assignment Help Finance Basics
Reference no: EM133110280

One way to value a share of stock is the dividend growth, or growing perpetuity model. Consider the following: The dividend payout ratio is 1 minus b, where b is the retention or plowback ratio. So the dividend next year will be the earnings next year E1 x (1- retention %). The most commonly used equation to calculate the sustainable growth rate is the return on equity times the retention ratio. Substituting these relationships into the dividend growth model, we'll be able to calculate the price of a share today. What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain.

Reference no: EM133110280

Questions Cloud

Diamond of national advantage framework : Select a country and industry and apply Porter's diamond of national advantage framework to the industry and the country you have chosen.
Critical decisions facing marketing management : Briefly discuss why marketing channel decisions are among the most critical decisions facing marketing management.
Activity-based costing in your future career : How do you think you would use activity-based costing in your future career?
Lifestyle marketing in grocery industry : What does San Antonio-based H.E.B. call its approach to lifestyle marketing in the grocery industry?
Calculate the price of a share : What are the implications of this result in terms of whether the company should pay a dividend or upgrade and expand its manufacturing capability? Explain.
Adapt to evolving technologies : Employers are looking for job candidates who are able to adapt to evolving technologies and practices and are willing to embrace those changes.
Proposal affect the stock price : B. Do you recommend the company to use the extra cash to pay off debt? How will this proposal affect the company?
What is the internal rate of return : The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machin
Draw a position diagram showing the payoffs : Draw a position diagram showing the payoffs from each investment and a combined position diagram (3 different diagrams).

Reviews

Write a Review

Finance Basics Questions & Answers

  Why utilize or rely on evidence based mgmt

Q1. Why utilize or rely on Evidence Based Mgmt? Q2. What are the core indicators within credibility of evidence?

  Assume you own an american office supplies company

Assume you own an American office supplies company. Which part of your business process would most likely be relocated to another country?

  Three theoretical ethical perspectives

How do (a) Canadian and (b) American diversity legislation fit or not fit with the three theoretical ethical perspectives

  Normally distributed with a mean

Assume that the heights of men are normally distributed with a mean of 67.3 inches and a standard deviation of 3.5 inches. If 100 men are randomly selected, find the probability that they have a mean height greater than 68.3 inches.

  A stock trades at 100 with a 6 months put option strike

a stock trades at 100 with a 6 months put option strike price100 trading at 3.50. if the 6 months call option trades at

  Calculate the real consumption welfare effect

Calculate the real consumption welfare effect using the data in Table. Has welfare improved or declined as a result of the price changes?

  Corporate finance questions

A company has no debt but can borrow at 7 percent. The firm's WACC is 12 percent and there is no corporate tax.

  What is the investor after-tax net income

Assume that the tax rate on both capital gains and dividend income is 15 %. An investor has two options for the stock of ABC firm.

  What coupon rate will the new bonds have

Company X originally issued 15-year bonds at par. The bonds currently have 10 years remaining until they mature. The bonds have a coupon rate of 7.6%.

  Effective return per dividend payment

What is the effective return per dividend payment period for Aunt Kathleen?

  What is the current share price in given case

If the required return is 16 percent and the company just paid a dividend of $3.20, what is the current share price? (Hint: Calculate the first four dividends.)

  Possible reasons for the decline in gross

Sam Hernandez has noticed a marked decline in his gross profit percentage from last year to this year, from 60% down to 40%.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd