Evaluate the value of stock using dividend discount model

Assignment Help Corporate Finance

Reference no: EM1316145

Compute the value of stock using Dividend Discount Model.

General Cereal common stock dividends have been growing at an annual rate of 7percent per year over the past 10 years. Current dividend (Do) is $1.70 per share. What is the current valve of a share of this stock to an investor who requires a 12 percent rate of return if the following conditions exist?

a. Dividends are expected to continue growing at the historic rate for the foreseeable future.

b. The dividend growth rate is expected to increase to 9 percent per year.

c. The dividend growth rate is expected to decrease 6.5 percent per year.

Reference no: EM1316145

Questions Cloud

Determine value of the stock : Determine Value of the stock using Dividend discount model on finding out growth rate

Hypothesis testing concept : A sample of approx 25 students enrolled in the university points out that X (bar) = $315.4 and s = $43.20.

Find an instance of a continuous random variable : For a binomial probability experiment, with n=150 and p=.2, it is appropriate to use the normal approximation to the binomial distribution.

Use elimination or substitution method equations : Use elimination or substitution method equations.

Evaluate the value of stock using dividend discount model : Evaluate the value of stock using Dividend Discount Model and Dividends are expected to continue growing at the historic rate for the foreseeable future.

Computing profit maximizing quantity : A firm uses a single plant with costs C = 160 + 16Q + .1Q 2 and faces the price equation-Find the firms profit maximizing price and quantity. What is its profit?

Find how much are you willing to pay for one share : Multiple choice questions on stock valuation - Pluto's is offering a preferred stock for sale. This stock will pay an annual dividend of $6. If your required return is 6 percent, Find how much are you willing to pay for one share of this stock ?

Subsiquent data which represents demand for company : Compare 2 moving averages using MSE and compute Exponential smoothing. The subsiquent data which represents demand for company ABC's products for the last 10 months.

Find the required probability for the normal distribution : What is the proportion of people surveyed that rated the subway system from 3 to 4. What is the proportion of people surveyed rated the Subway System from 1 to 3.

User Account

All Pages