Stock under the discounted cash flow model

Assignment Help Financial Management
Reference no: EM131511066

Part A:

ABC expects to pay a dividend one year from now of $0.91. The dividend exhibits constant growth of 10.2%, and the current price of the stock is $23.49. Given all of this information, what is the expected rate of return for this stock under the discounted cash flow model?

Part B:

ABC Incorporated just paid a dividend of $1.59 on its common stock. Joe forecasts that the dividends for ABC will grow at a constant rate of 10.3% over the foreseeable future. Assuming that he is correct, how many total dollars of dividends should Joe expect to receive over the next five years?

Part C:

XYZ common stock is expected to pay a dividend of $2.58 next year, and that dividend grows at a constant rate of 9.4 percent. If the current price of XYZ common stock is $20.25, then what is the expected rate of return for this stock, based on the Discounted Cash Flow model?

Reference no: EM131511066

Questions Cloud

What is the reward-to-volatility ratio for the equity fund : What is the reward-to-volatility ratio for the equity fund?
What is the future value in the account after seven? years : What is the future value in the account after seven? years?
Indifferent to the two forms of payment : what final payment will the bank require you to make so that it is indifferent to the two forms of payment?
Effective annual return friendly earns on lending business : What’s the effective annual return Friendly’s earns on this lending business?
Stock under the discounted cash flow model : what is the expected rate of return for this stock under the discounted cash flow model?
What is equivalent annual cost of the tool : what is the equivalent annual cost of the tool?
Indifferent between accepting the investment and rejecting : At what rate would you be indifferent between accepting the investment and rejecting it?
What is the present value of this incentive : What is the present value of this incentive if you plan to work for the company for 42 years and the interest rate is 5.9% (EAR)?
What was the rate of return to an investor in the fund : What was the rate of return to an investor in the fund?

Reviews

Write a Review

Financial Management Questions & Answers

  Proficient-level-compute the npv statistic for project

Proficient-level: Compute the NPV statistic for Project Y and tell [advise] whether the firm should accept or reject the project with the cash flows shown in the chart if the appropriate cost of capital is 12 percent. Project Y Time 0 1 2 3 4 Cash Fl..

  Compute the federal income tax liability

Pace Corporation had a taxable income of $300,000 in 2007. Which of the following expression may be used to compute the federal income tax liability for the company?

  Assume price increase follows simple interest calculation

Find the amount Ashkin should deposit today if he needs $3,750 in his account in 5 months. Assume his account pays 4% simple interest. A new computer costs $2,100. If the price of computers has increased by 1% in the past 6 months, how much did the c..

  At what price are fix-its bonds selling

Fix-It Inc. recently issued 10-year, $1000 par value bonds at an 11% coupon rate. Assume bond coupons are paid semiannually. Two years later, similar bonds are yielding investors 6%. At what price are Fix-Its bonds selling? What would the bonds be se..

  Evaluate a specific derivative contract

Evaluate a specific derivative contract. Outline short- and long-term trading patterns in the specific contract. Explain factors that are currently affecting this derivative contract and specific risks and potential benefits to investing in this deri..

  Explain why we refer to the opportunity of cost of capital

Opportunity Cost of Capital: Explain why we refer to the opportunity of cost of capital, instead of just "cost of capital" or "discount rate." While you're at it, also explain the following statement: "the opportunity cost of capital depends on the p..

  What is opportunity cost of labor employed for the project

Suppose that the labor market is perfectly competitive and the market wage is $15. What is the opportunity cost of the labor employed for the project?

  Explain why the expansion of sears

Discuss in general (without any calculation) whether Microsoft’s bid for Yahoo is justifiable. Explain why the expansion of Sears, Roebuck & Co. into the financial services industry fails. Explain how the acquisition of NCR by AT&T is value-destructi..

  After-tax cost of debt

The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Hueser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Heuser's after-ta..

  Decrease the current value of a stock

Which one of the following will decrease the current value of a stock? Atlas Home Supply has paid a constant annual dividend of $2.40 a share for the past 15 years. Yesterday, the firm announced the dividend will increase next year by 10 percent and ..

  Now stands and federal government intends

Candy Store now stands and the federal government intends to take Candy Store's property to build that highway.

  How long will its supernormal rate of growth

How long will its supernormal rate of growth last before it levels off to equal the normal rate for a company with its risk?

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