Computation of value of the stock using constant growth

Assignment Help Finance Basics
Reference no: EM139607

Calculation of value of the stock using constant growth model.

The Kummins Engine Company common stock has a beta of 0.9. The current risk-free rate of return is 5% and the market risk premium is 8%. The CEO of the company is quoted in a pres release as saying that the firm will pay a dividend of $0.80/share in the coming year and expects the dividends to grow at a constant rate of 7% for the foreseeable future. Using the constant growth model, what value would you assign to this stock?

Reference no: EM139607

Questions Cloud

Computation of compound annual dividend growth rate : Computation of compound annual dividend growth rate and current stock price and The chairman of Heller Industries told a meeting of financial analysts
Evaluate what markup percentage is the company using : Evaluate what markup percentage is the company using, Total fixed costs will decrease and fixed cost per unit will decrease.
Computation of book value per share : Compute the book value per share based on the reported stockholders' equity account for Bridgford Foods in fiscal year
What is the purpose of the statement of cost of goods : What is the purpose of the Statement of Cost of Goods Manufactured, example of direct labor cost for an airplane manufacturer
Computation of value of the stock using constant growth : computation of value of the stock using constant growth model where The current risk-free rate of return is 5% and the market risk premium is 8%
Evaluate the amount of gross profit : Evaluate the amount of gross profit realized each year, assuming Barkly uses the cost-recovery method and uses the installment-sales method.
Preparation of a balance sheet with given trial balance : Prepare a balance sheet at December 31, 2007 for John Nalezny Corporation and Ignore income taxes
Evaluate pension expense for the year 2010 : Evaluate pension expense for the year 2010. Prepare journal entry to record pension expense and the employer's contribution to the pension plan in 2010.
Prepare journal entry to record amortization expense : Prepare the journal entry to record amortization expense for the first year. Show how this patent is reported on the balance sheet at the end of the first year.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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