Earnings and dividends per share are expected to grow

Assignment Help Financial Management
Reference no: EM131058513

Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the market capitalization rate is 8%, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Company Z-prime’s earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $10, the market capitalization rate is 8% and next year’s EPS is $15. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131058513

Questions Cloud

Use daily compounding-find price of call option on the stock : The current stock of a stock is $20. In one year the price will be either $26 or $16, the annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year (hint: use daily compounding..
Describe to me what you learned from these empirical studies : In this section you will dive into your data and describe what you find. What does dialogue look like on the onlineforums you have selected? How is gender represented or signified in the video games you analyzed?
Example of representing beings : How are sponges characterized according to example of representing beings, basic  morphology, type of symmetry, embryonic (germ) layers an d coelom, digestive system, respiratory system, circulatory system, excretory system, nervous system and typ..
Should the firm conduct customer segment research : B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.24 million...
Earnings and dividends per share are expected to grow : Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the market capitalization rate is 8%, what is the current stock price?  Assume next year’s dividend is $10, the market cap..
Which company using better basis of accounting and why : Which company using better basis of accounting and why? Explain your answer with appropriate rationale. Explain, are the amounts of profit calculated by both the companies correct and similar to cash in hand?
Dividend discount model-stock price : You expect Budweiser will pay dividends of 2.25 in one year, 2.50 in two years, and 2.75 in three years. From that point onwards, dividends will grow at 6% per year. Investors' required rate of return is 12%. According to the Dividend Discount Model,..
Determine the make-up of your investment portfolio : Assume you have reached a point in your life where you have a budget, your cash inflows and outflows are matched to the point where your bills are getting paid; you have an emergency fund to cover contingencies; and your overall needs of your family ..
What is the NPV of Projects and discount rates : Consider the following two mutually exclusive projects: What is the NPV of Projects X and Y at discount rates of 0%, 15%, and 25%?

Reviews

Write a Review

Financial Management Questions & Answers

  In response to the financial crisis

In response to the financial crisis of 2007, the Federal Reserve has maintained near-zero interest rates for the past several years. The Fed has kept rates low due to slow economic and employment growth during the past few years. Suppose the Fed rais..

  What was the firms cash flow to creditors

The 2010 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt of $2.3 million, and the 2011 balance sheet showed long-term debt of $2.55 million. The 2011 income statement showed an interest expense of $190,000. What was the firm's cash ..

  Mutual fund-common shares in buy me corporation

Figure 3.6 gives a decision tree for Mr. Smart’s situation. Mr. Smart is risk-averse. The amount of utility he derives from a payoff is Utility = 2In (payoff). Because of a planned major purchase, Mr. Smart intends to sell his investment one year lat..

  Zero coupon bond-what was your total return for past year

You purchased a zero coupon bond one year ago for $173.85. The market interest rate is now 9 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding. ..

  What is your estimate of the gross profits to the firm

Carlyle chemicals are evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the projects cash flow. Specifical..

  What about a stock index for foreign stocks

What about a stock index for foreign stocks-is this a good or a bad idea? just 1,5 page please also cite it appropriately if you borrow anyword from anybody. thank you

  Funds invested in security-what is the portfolio variance

A portfolio has 45 percent of its funds invested in Security One and 55 percent invested in Security Two. Security One has a standard deviation of 6 percent. Security Two has a standard deviation of 12 percent. The securities have a coefficient of co..

  Growth rate in earnings per share

10 years ago, Weed Go Inc. earned $0.98 per share. Its earnings this year were $2.01. What was the growth rate in earnings per share (EPS) over the 10-year period? State your answer as a percentage to two decimal places (e.g. 16.38%).

  Life insurance and an individual universal life policy

Dan and Mary Green are in their mid-30s and have two children, ages 8 and 5. They have combined annual income of $95,000 and own a house in joint tenancy with a market value of $310,000, on which they have a mortgage of $250,000. As their ?nancial pl..

  How much cash does the company have

Saunders Corp. has a book net worth of $13,430. Long-term debt is $8,650. Net working capital, other than cash, is $3,305. Fixed assets are $17,830 and current liabilities are $1,810. How much cash does the company have? What is the value of the curr..

  In working out your responses to the discussion question

in working out your responses to the discussion question you should choose examples from your own experience or find

  Covered as a workers compensation claim

It’s the end of the summer and your firm has its annual Family Picnic Day on the Saturday of Labor Day weekend. It is a big event: games for kids, a magician who makes balloon animals, tons of great food, kegs of beer, a band for musical entertainmen..

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