Dividend discount model and the actual stock price

Assignment Help Financial Management
Reference no: EM131016201

You’ve collected the following information from your favorite financial website. 52-Week Price Stock (Div) Div Yld % PE Ratio Close Price Net Chg Hi Lo 77.40 10.43 Palm Coal .36 2.6 6 13.90 –0.24 55.81 33.42 Lake Lead Grp 1.54 3.8 10 40.43 –0.01 130.93 69.50 SIR 2.00 2.2 10 88.97 3.07 50.24 13.95 DR Dime .80 5.2 6 15.43 –0.26 36.70 20.91 Candy Galore 0.49 1.5 28 ?? 0.18 Requirement 1: Using the dividend yield, calculate the closing price for Candy Galore on this day. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Stock price $ Requirement 2: Assume the actual closing price for Candy Galore was $32.36. Your research projects a 4.50 percent dividend growth rate for Candy Galore. What is the required return for the stock using the dividend discount model and the actual stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Required return %

Reference no: EM131016201

Questions Cloud

Default risk premium-the real risk-free rate : Default Risk Premium The real risk-free rate, r*, is 2.25%. Inflation is expected to average 2.5% a year for the next 4 years, after which time inflation is expected to average 3.4% a year. Assume that there is no maturity risk premium. An 11-year co..
What is default risk premium on corporate bond : Default Risk Premium A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond?
What is present value of the annuity : A 14-ear annuity pay $2,800 per month, and payments are made at the end of each month. The interest rate is 12% compounded monthly for the first seven years, and 10% cmpounded monthly thereafter. What is the present value of the annuity?
Find the amount-grow under each of these conditions : Find the amount to which $725 will grow under each of these conditions:
Dividend discount model and the actual stock price : You’ve collected the following information from your favorite financial website. 52-Week Price Stock (Div) Div Yld % PE Ratio Close Price Net Chg Hi Lo 77.40 10.43 Palm Coal .36 2.6 6 13.90 –0.24 55.81 33.42 Lake Lead Grp 1.54 3.8 10 40.43 –0.01 130...
What is the credit rationing effect : What is the credit rationing effect? Is it more significant in private debt market or public debt market? What is the cause of this effect?
Calculate the cost of ending work in process : At the start of November, Penco Refinery had Work in Process inventory consisting of 4,700 units that were 80 percent complete with respect to materials and 60 percent complete with respect to conversion costs. Calculate the cost per equivalent unit ..
Diversification occurs when stocks with low correlations : Diversification occurs when stocks with low correlations of returns are placed together in a portfolio. Identify at least one type of firm that might exhibit low correlations of returns with the overall stock market? Explain why the correlations of t..
What is the present value-future value of the annuity : Assume an annuity payment of $300, an annuity life of 10 years, and a required return of 8%. If the annuity is an ordinary annuity, what is the future value of the annuity? If the annuity is an ordinary annuity, what is the present value of the annui..

Reviews

Write a Review

Financial Management Questions & Answers

  Effectiveness of the working capital guarantee program

The topic addressed in this module is financing international trade. One factor to consider here is the working capital guarantee program. That is, how is this program administered by outside agencies? Your discussion topic is to evaluate the effecti..

  About how much should be in the account when you close it

You deposit $1,000 in an account. You expect the account to earn 0.75% annual interest for the first six years. Then you expect the account to earn 1.03% annual interest until you close the account after 15 years. About how much should be in the acco..

  Why do the durations differ

What is the duration of a bond with a par value of $ 10,000 that has a coupon rate of 3.5 percent annually and a final maturity of two years? Assume that the required rate of return is 4 percent compounded semiannually. What is the duration of a two-..

  Calculate the value of your companys stock

Discuss Home Depot, Inc stock choice; include stock’s economic, industry, and company analysis; include some ideas about how you can calculate the value of your company’s stock,

  What is best estimate of the stocks current intrinsic price

Decker Tires’ free cash flow for the current year equals $1.32 million. Analysts expect the company's free cash flow to grow by 30% next year, by 10% in the year after that, and at a constant rate of 5% thereafter. The WACC for this company 9.00%. De..

  Future value of five-year ordinary annuity-annual payments

What is the future value of a five-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate?

  Cause problems in free market exchange

Given what we are seeing with regards to the healthcare labor market the distribution of assets to under-served populations, what sort of policy interventions is needed? Or, do regulations and policy changes just cause problems in a free market excha..

  Examine who is involved in financial decision-making

Examine who is involved in financial decision-making and analyze what are the steps in the financial decision-making process.

  Aftertax cost of debt-what is the cost of equity

Kose, Inc., has a target debt–equity ratio of 1.30. Its WACC is 9.3 percent, and the tax rate is 38 percent. If Kose’s cost of equity is 15 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 6.2 percent, w..

  What would be the hedge ratio for the option

You would like to be holding a protective put position on the stock of Avalon Corporation to lock in a guaranteed minimum value of $50 at year-end. Avalon currently sells for $50. Over the next year, the stock price will increase by 10% or decrease b..

  Distinction between upstream and downstream transactions

You are CFO of a large company that has a few subsidiaries. A new board member is unfamiliar with consolidation procedures particularly with respect to the elimination of intercompany inventory transactions. Provide a summary of your talking points w..

  What is the annual ordering cost of the post card inventory

Cheeseburger and Taco Company purchases 8,024 boxes of cheese each year. It costs $11 to place and ship each order and $3.24 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is th..

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