Using dividend growth model

Assignment Help Financial Management
Reference no: EM131529213

Assume today is December 31, 2013. Imagine Works Inc. just paid a dividend of $1.40 per share at the end of 2013. The dividend is expected to grow at 18% per year for 3 years, after which time it is expected to grow at a constant rate of 5% annually. The company's cost of equity (rs) is 9.5%. Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today (December 31, 2013)? Round your answer to the nearest cent. Do not round intermediate calculations.

Reference no: EM131529213

Questions Cloud

Sketch the given function for the calues of t : Make a carefully labeled sketch for each of the following functions. Sketch case ? for values of 0 in the range 0 = ? = 6p.
The firm to recover its initial investment in this project : How long will it take the firm to recover its initial investment in this project?
Describing the important attributes of the company : Describing the important attributes of the company that should be considered when analyzing its consideration of social responsibility
Write a query to display average cost of books : Use the Ch08_Fact database shown in Figure P8.44. For problems with very large results sets, only the first several rows of output are shown in the following.
Using dividend growth model : Using the dividend growth model (allowing for nonconstant growth), what should be the price of the company's stock today
What is the goal of managed health care : What is the goal of managed health care? What does it strive to do?What is the role of a primary care physician (PCP) in a traditional HMO?
What will be the effect on profit of accepting the order : On the other hand, the company in China is willing to pay only $130 per unit. What will be the effect on profit of accepting the order?
Analyze how did each development influence american culture : What were the major developments in the evolution of mass media during the last century? How did each development influence American culture?
Identify some reasons that online learning succeeds or fails : Identify some reasons that online learning succeeds OR fails? Choose a point of view and support it using examples from outside sources.

Reviews

Write a Review

Financial Management Questions & Answers

  What is estimate of the fair price of a share of the stock

Company JUK has a ROE of 25% and the company will not pay any dividend for the next 3 years. It is estimated that the company will pay $2 dividend per share after three years and then to level off to 5% per year forever. What is your estimate of the ..

  Investment Return-percent return

Investment Return MedTech Corp stock was $51.05 per share at the end of last year. Since then, it paid a $0.55 per share dividend. The stock price is currently $62.60. If you owned 300 shares of MedTech, what was your percent return?

  What is value of their stock when required rate of return

What is the value of their stock when the required rate of return is 18.13 percent?

  Expected return-standard deviation and tandard deviation

Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) = .152, σA = .362, and σB = .622. a-1. Calculate the standard deviation of a portfolio that is composed of 37 percent A and 63 percent B when the correlati..

  Real dollars and the average inflation rate is expected

Frank wants to have $2,000,000 in his retirement account when he retires 30 years from now. If he expects a return of 8%, how much does he need to invest monthly?  Same as (1), but now Frank wants to have $2,000,000 in real dollars and the average in..

  Equilibrium with required return equal to expected return

A stock is trading at $65 per share. The stock is expected to have a year-end dividend of $5 per share (D1 = $5), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 11% (assume the market is in ..

  Calculate the effective rent to the owner

Calculate the effective rent to the owner (after expenses) for each lease alternative using a 10 percent discount rate.

  What is change in price the bond will experience in dollar

A 7.10 percent coupon bond with 14 years left to maturity is priced to offer a 7.8 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.4 percent. What is the change in price the bond will experience in dollars?

  The company inventory policy optimal

Louise Manufacturing uses 2,800 switch assemblies per week and then reorders another 2,800. If the relevant carrying cost per switch assembly is $6.20 and the fixed order cost is $1,200, is the company's inventory policy optimal? Why or why not?

  Demand for emergency room treatment

Patients arrive at the emergency room of Costa Valley Hospital at an average of 5 per day. The demand for emergency room treatment at Costa Valley follows a Poisson distribution. (A) Using Appendix C, compute the probability of exactly 0,1,2,3,4, and..

  Sales of the product are expected to decline

Boomer Products, Inc. manufactures "no-inhale" cigarettes. As their target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a reat of 5% (-5%) annually for..

  What is the total cash flow for this project in year

Phone Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of $5.994 million. The fixed assets fall into a 5-year MACRS category, and it is expected that the assets will have no salvage value at the..

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