Geometric growth rate to find the firms discount rate

Assignment Help Financial Management

Reference no: EM13812365

Select a dividend paying company. Use the previous 5+ years (20 quarters, dividends are paid quarterly, but typically only change annually so you will have 4 growth rates) to find the arithmetic and geometric average growth rate of dividends. Then use the current stock price, recent dividend, and geometric growth rate to find the firm’s discount rate. Excel sheets/tables are fine to illustrate the information, but should be accompanied with written work summarizing your findings. What is the stock’s cost of equity according to the SML (CAPM) method?

Show excel formulas-

Reference no: EM13812365

Questions Cloud

What is current share price-growth rate in dividends forever : Lohn Corporation is expected to pay the following dividends over the next four years: $14, $10, $9, and $4.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 10..

What is the equivalent after tax yield : Assume a municipal bond has 18 years until maturity and sells for $5,6040. It has a coupon rate of 5.70 percent and it can be called in 10 years. What is the yield to call if the price is 110 percent of par? A taxable corporate issue yields 6.5 perce..

What is the portfolios expected return : A portfolio is invested 12 percent in Stock G, 52 percent in Stock J, and 36 percent in Stock K. The expected returns on these stocks are 8 percent, 14 percent, and 16 percent, respectively. What is the portfolio's expected return? (Round your answer..

Arithmetic average return and standard deviation of returns : Gather information on the S&P 500 for 2012, 2013, 2014. What is the arithmetic average return and standard deviation of returns for each year

Geometric growth rate to find the firms discount rate : Select a dividend paying company. Use the previous 5+ years (20 quarters, dividends are paid quarterly, but typically only change annually so you will have 4 growth rates) to find the arithmetic and geometric average growth rate of dividends. Then us..

What is the profitability index of the investment : You are offered an investment with returns of $ 1,211 in year 1, $ 4,785 in year 2, and $ 5,756 in year 3. The investment will cost you $ 6,129 today. If the appropriate Cost of Capital (quoted interest rate) is 9.4 %, what is the Profitability Index..

The stock price will grow at a constant : Which is the amount that should be paid for a stock that will pay a dividend of $3.18 in one year and $5.57 in two years? After that, the stock price will grow at a constant 5% per year forever. The appropriate discount rate is 12%. Show your answer..

What does a net present value of zero mean : According to the textbook, the net present value rule states that “An investment should be accepted if the net present value is positive and rejected if it is negative.” What does a net present value of zero mean? If you were analyzing a project with..

Explain why the reward-to-risk ratio : Given that higher risk investments, such as small-company stocks, have outperformed other investments over time, why don't all investors choose to invest only in these high risk securities? Explain why the reward-to-risk ratio must be equal for all s..

User Account

All Pages