Constant growth dividend model

Assignment Help Financial Management
Reference no: EM131609799

Amazon pays a $2.75 dividend right now. You expect this dividend to grow at 4.75% a year indefinitely. Given the risks inherent in this forecast, you demand an 8.25% return on this investment. Using the Constant Growth Dividend model, what is the maximum you would pay for the stock? Show work.

Reference no: EM131609799

Questions Cloud

How would you analyze us treasury bills and bonds : How would you analyze US Treasury Bills, Promissory Notes, and Bonds? Is it necessary to have distinct debt securities such as these, why or why not?
Prepare journal entry for this issue of stock : ABC issued 1,000 shares of $10 par value common stock for $15,000. Prepare journal entry for this issue of stock
Is there any tradeoff resulting from strategy to avoid risk : Its foreign cash inflows to be received from exporting and cash outflows to be paid for imported supplies over the next year are shown in the following table.
Explain one type of business that needs a financial manager : Explain one type of business that needs a financial manager and their function in that business. How do the 4Ps come into play in this environment?
Constant growth dividend model : Using the Constant Growth Dividend model, what is the maximum you would pay for the stock?
Compute the basic earnings per share : Required: Compute the basic earnings per share and the diluted earnings per share. The tax rate is 30%
Determine manually-trial and error and rate of return : Determine manually, by trial and error, Lucinda’s rate of return, determine Lucinda’s rate of return if she owns the house for 6 months.
Construct formal proofs for all the arguments below : Construct formal proofs for all the arguments below. Use equivalence rules, truth functional arguments, and the rules of instantiation and generalization.
Determines total compensation expense : The Black-Scholes option pricing model determines total compensation expense to be $1,900,000

Reviews

Write a Review

Financial Management Questions & Answers

  What is the current intrinsic value of marine oils stock

What are Marine Oils’ cost of equity and weighted average cost of capital? What is the current intrinsic value of Marine Oils’ stock?

  Calculate dcfror and npv project life

Consider an investment of $500,000 at time zero for machinery and equipment to be depreciated using 8 year straight line depreciation starting in year 1 to year 8. Annual revenue is estimated to be $400,000 and annual operating costs of $140,000. Cal..

  An investor has two bonds in his portfolio

An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 8% annual coupon. Bond L matures in 19 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturit..

  Business owner return on investment

Gatwick Ltd. has after tax profits (net income) of $500,000 and no debt. A business owner’s return on investment or equity is ROI=ROE=Net Income/Equity.

  Determine the total ending value of the investment

An investor in the United States bought a one-year Brazilian security valued at 195,000 Brazilian reals. The U.S. dollar equivalent was 100,000. The Brazilian security earned 16% during the year, but the Brazilian real depreciated 5 cents against the..

  The bonds make semi-annual payments

Crossfade Co. issued 15-year bonds two years ago at a coupon rate of 9.4 percent. The bonds make semi-annual payments. If these bonds currently sell for 105 percent of par value, what is the YTM? (Do not round intermediate calculations. Round your an..

  Calculate annual return on mutual funds-investment period

Suppose an individual invests $20,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.0 percent of the amount invested and is deducted from the original funds invested. calculate the annual return on the m..

  About the net income

Y3K, Inc., has sales of $6,219, total assets of $2,835, and a debt–equity ratio of 1.50. If its return on equity is 10 percent, what is its net income?

  Use as benchmark when evaluating the performance

Which index should Jan use as a benchmark when evaluating the performance of her XYZ mutual fund?

  What is effective annual rate on the loan

What is the effective annual rate on the loan?

  Save money to meet three objectives

Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $29,500 per month for 25 years, with the first payment received 30 years and 1 month from now. If he can..

  How does change in leverage affect the firm return on equity

How will this change affect the firm's WACC, the expected return on the firm's new assets? How does the change in leverage affect the firm's return on equity?

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