Stock currently overvalued-undervalued or correctly valued

Assignment Help Financial Management

Reference no: EM132053821

You’ve collected the following information from your favorite financial website. 52-Week Price Stock (Div) Div Yld % PE Ratio Close Price Net Chg Hi Lo 77.40 10.43 Palm Coal .36 2.6 6 13.90 –.24 55.81 33.42 Lake Lead Grp 1.54 3.8 10 40.43 –.01 131.07 70.20 SIR 2.70 3.0 10 89.11 3.07 50.24 13.95 DR Dime .80 5.2 6 15.43 –.26 35.00 20.74 Candy Galore .32 1.5 28 ?? .18 According to your research, the growth rate in dividends for SIR for the next five years is expected to be 20.5 percent.

Suppose SIR meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent indefinitely. Assume investors require a return of 15 percent on SIR stock. According to the dividend growth model, what should the stock price be today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?

Reference no: EM132053821

Questions Cloud

Interpret the value computed as well for average cost : How to compute the following in a company's economic value added (EVA) and interpret the value computed as well for Average cost of funds 10.0 %

Capital budget increases : Why does WACC increase and IRR decrease as the capital budget increases?

Define your thoughts on criteria use for extraordinary items : The attacks of September 11 were analyzed in specifics by Emerging Issues Task Force (EITF). On September 20, 2001, EITF discussed whether the losses.

What is barker required rate of return : Barker Corp has a beta of 1.10, the real risk free rate is 2.00%., investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%.

Stock currently overvalued-undervalued or correctly valued : Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?

What is capital budgeting : What is capital budgeting and how is it different from operational budgeting?

Exercise would occur with american put option : What is the lowest strike price where early exercise would occur with an American put option?

What are some of the limitations of the payback method : What are some of the limitations of the payback method and how are these addressed by the net present value (NPV) method?

Need of developing healthcare system in oman : Develop a Problem Statement - Need of developing healthcare system in Oman - Situational Analysis - The healthcare system in Oman

User Account

All Pages