Gordon growth model

Assignment Help Finance Basics
Reference no: EM133119422

Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock. The stock currently pays no dividends, but expected to begin paying dividends of $4 in five years. The firm's cost of equity is 11%. Suppose the stock is expected to grow at a rate of 9% for the next four years that it started paying dividends, then slows to a long-term growth rate of 3%, how much is that stock worth today?

Reference no: EM133119422

Questions Cloud

List interesting information about your attractions : World-renowned Tourist Attractions - Waterways -Rhine, Danube, Rhone, Volga - Plan a day by day itinerary to each destination of your choice
Prepare a statement of cash flows for july : Received monthly invoice for dry cleaning expense for July (to be paid on August 10), $29,100. Prepare a statement of cash flows for July
Can efficiency be achieved when externalities exist : Can efficiency be achieved when externalities exist?
Comment on the solvency of urban platter : Comment on the solvency of Urban Platter in 2021 as compared to 2020 based on the performance of the ratio identified in (a)
Gordon growth model : Assume that you are using the dividend discount model (the Gordon Growth Model) to value stock. The stock currently pays no dividends, but expected to begin pay
Fifteen-year zero-coupon bond : Suppose you invested in a fifteen-year zero-coupon bond with a face value of $1000. If the bond originally cost $1010, what was the yield on the bond when you p
Compute the value of a stock paying : Compute the value of a stock paying no dividends today, but that is expected to pay a constant annual dividend of $4 starting in year 5.
Twenty-year zero-coupon bond : Suppose you invested in a twenty-year zero-coupon bond with a face value of $1000. The bond originally cost $675. Suppose that today (four years later) comparab
Invest an amount of money : a) You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6% interest. Approximately how long must you

Reviews

Write a Review

Finance Basics Questions & Answers

  Create a two-step binomial tree for an american put option

Create a two-step binomial tree for an American put option. Compare each node and determine when you would want to exercise the option.

  What is the holding period return rate

You just bought a bond of Six Flags at the price of $980. The bond has a face value of $1000, which is the amount of money you will get paid.

  Tax on interest and capital gains

Present your answers to the above questions in a Excel spreadsheet

  How much would you pay for an investment that provides 1000

how much would you pay for an investment that provides 1000 at the end of the first year if your required rate of

  Perform in the middle of a complex software development

Why do you think configuration management and project change control are difficult to perform in the middle of a complex software development project

  Effective and nominal interest rates

You're offered two loan options which you should choose between. Federal Bank offers to charge you 6% compounded annually. State Bank offers to charge you 5.8% compounded monthly. Which of following is true?

  Why are the up and down parameters adjusted

What is the difference in these two examples, and why did we adjust the parameters in one case and not in the other?

  Bank a makes a usd 10 million five-year loan and wants to

bank a makes a usd 10 million five-year loan and wants to offset the credit exposure to the obligor. a five-year credit

  Rising interest rate environment

What risk is there with the housing boom that Canada is seemingly in and what implication does a rising interest rate environment have in Canada?

  Graph the duration approximation versus the actual percent

A bond has a face value of $1,000, an annual coupon rate of 6.50%, an yield to maturity of 9.2%, makes 2 (semi-annual) coupon payments per year

  What is the bond current market price

Madsen Motors's bonds have 6 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate

  What is the incremental savings of buying the valves

What is the incremental savings of buying the valves? (answer should be in per unit format and is a positive number)

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