User Account

All Pages

How much should the xyz stock be selling for

Assignment Help Financial Accounting
Reference no: EM132964138

Currently, ABC Company pays a constant dividend of $10 on its stock annually. Assume the required rate of return to be 10%, compounding annually.

Problem (a) Evaluate the share price of ABC Company.

Later, ABC Company decides to raise its dividend with a growth rate of 5%, starting from next year. The dividend paid out next year is $10 × 1.05 = 10.5, and this will grow by 5% in the following years. Assume the required rate of return to be 10%.

Problem (b) Evaluate the share price of ABC Company based on this change of dividend policy.

Another Company, XYZ, was previously paying a dividend of $5 per year. Suppose it is expected to increase its dividends by 20% in the first year and by 15% in the second year. After that, dividends will increase at a rate of 5% per year indefinitely. Assume the required rate of return to be 10%.

Problem (c) According to this information, how much should the XYZ's stock be selling for?

Reference no: EM132964138

Questions Cloud

Prepare an income statement : Prepare an income statement and a statement of shareholders' equity for the year ended December 31, 2021, and a classified balance sheet
Management model used by bill gates : Microsoft competes in the ICT industry by leveraging its HR as one of its competitive advantages both in the 1980s and in the 1990s.
Discuss the importance of employee engagement : Critically discuss the importance of Employee Engagement and the HR strategies that organisations can adopt to enhance the commitment of employees towards
Define interest rate risk on bond prices : Which bond is with a higher interest rate risk? Anson is studying the interest rate risk of two bonds that he is holding. Bond A is with longer term to maturity
How much should the xyz stock be selling for : How much should the XYZ's stock be selling for? Later, ABC Company decides to raise its dividend with a growth rate of 5%, starting from next year.
Implications on the organization operations : Please help me with this question.Its quite urgent.I will give you helpful ratings.
What are earnings per share : ABC Company had addition to retained earnings for the current fiscal year just ended of $395,000. What are earnings per share (E/PS)
Abilities to apply theories and metaphors : Explain why you have selected this particular position? What has influenced your choice, please refer to course concepts and theories
Quality management system principles : Briefly discuss on your own words, and give example for each of the 7 Quality Management System Principles

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the market price of plum stock

Plum just paid a dividend of $4.00 per share. If Plum's dividends are growing at a constant rate of 9% per year, what is the market price of Plum stock?

  Which country has the absolute advantage in the production

Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?

  Identify which of the three should be classified as current

As of December 31 of this year, identify which of the three should be classified as current and which should be classified as noncurrent.

  Compute what is the net present value of a project

An investment has the following cash flows and a required return of 12 percent. Based on IRR, should this project be accepted? Why or why not?

  Find the firms are roa and asset turnover ratio

2920 which represents 20 days sales total assets are 73,000 the firms operating profit margin 6% find the firms are ROA and asset turnover ratio

  Compute what is the project profitability index

What is the project's Profitability Index? A project is projected to cost $1,500,000 to undertake. It will generate positive cash inflows.

  Peremptory refers to the fact that forensic accountant

The scribes of ancient Egypt were the forerunners of today's accountants. Consulting standards may apply to a forensic accountant can be proactive. Arthur Andersen created a CPA firm that eventually disappeared. Peremptory refers to the fact that a f..

  How many deposits will have to make

How many deposits will he have to make? Victoria deposits $1,500 at the end of every 3 months in an RRSP that is earning 6.90% compounded

  Which shareholders equity can be described as claims of

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates? Which Shareholders equity can be described as claims of

  Estimate the value of? ge shares today

If? GE's equity cost of capital is 8.7%?, estimate the value of? GE's shares today. In? mid-2018, some analysts recommended that General Electric? (GE) suspend

  What is the book value per ordinary share for hoyt corp

If Hoyt were to be liquidated, the preference stockholders would receive par value plus a premium of ?50,000. The book value per ordinary share is

  How much would have in account after six months

How much would have in account after six months?Suppose you decide to deposit $23,000 into a savings account that pays a nominal rate

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd