How much should you be willing to pay for stock

Assignment Help Financial Management

Reference no: EM131937314

You are considering the purchase of common stock that paid a dividend of $2.50 yesterday. You expect this stock to have a growth rate of 10% for the next 3 yrs, resulting in dividends of D1=$2.75, D2=$3.025, and D3=$3.3275. The long-run growth rate after year 3 is expected to be 12%(this is, a constant growth rate after year 3 of 12% per year forever). If you require a rate 15% rate of return, how much should you be willing to pay for this stock?

Reference no: EM131937314

Questions Cloud

Proposed acquisition of new special-purpose truck : You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck.

Considering replacing canning machine : International Soup Company is considering replacing a canning machine. The machine will be depreciated straight line over its five-year life.

Corresponding cost of capital assume the equity financing : Calculate the corresponding cost of capital assume the equity financing all comes from new issues

Use function pmt to calculate mortgage payment : Use function “PMT” to calculate your mortgage payment. Use function “RATE” to calculate the interest rate given a payment of $1500 and a loan amount of $400,000

How much should you be willing to pay for stock : You are considering the purchase of common stock that paid a dividend of $2.50 yesterday. how much should you be willing to pay for this stock?

What should be the current market price of company stock : If BrandMarts investors demand a 12% rate of return, what should be the current market price of the company's stock?

Hedge your currency exposure : You will be making payment on a shipment of imported goods (CAD100,000) in 6 months and want to hedge your currency exposure.

The firm required rate of return : If the tax rate on ordinary income is 40 percent and the firm’s required rate of return is 16 percent, should the firm purchase the system? Why?

What is weighted average cost of capital : What is the weighted average cost of capital?

User Account

All Pages