Using the dividend discount model to value stock

Assignment Help Financial Management
Reference no: EM131448785

Assume that you are using the dividend discount model ( the gordon model) to value stock the stock currently pays no dividends, but expected to begin paying dividends $3 per share in four years.

a) Compute the value of a stock paying no dividends today, but that is expected to pay annual dividends of $3 in four years. At that time dividends are expected to grow at a constant rate of 5% and the firm’s cost of equity is 9%

b) If instead the firm’s stock was to pay a constant annual dividend of $3 starting year 4 how would you value that stock?

c) Suppose the stock is expected to grow at a rate of 15% for the next five years that it started paying dividends, then slow to a long-term growth rate of 5%, how much is that stock worth today?

Reference no: EM131448785

Questions Cloud

Considering two mutually exclusive projects : Good old XYZ Corp. is considering two mutually exclusive projects, A & B in order to expand their product line.
Prepare a net worth statement : Prepare a cash flow statement showing discretionary and non-discretionary items. Prepare a net worth statement.
What is the amount of your payment : You have just taken out a 25-year $550,000 mortgage to buy a new house. what is the amount of your payment?
What methodology or solution are you proposing : What "methodology" or solution are you proposing?
Using the dividend discount model to value stock : Assume that you are using the dividend discount model to value stock the stock currently pays no dividends,
Calculate the beta portfolio : Security Percent of portfolio Beta Stock A 55% 1.04 Stock B 13% 1.18 Stock C Please calculate it 0.83 Calculate the beta portfolio.
Computer dealer offers to lease system : A computer dealer offers to lease a system to you for $50 per month for two years.
Evaluate the company fcf and roic : Collect the company's 5 year growth rate (CAGR) in operating revenue as at the end of the most recent financial year.
More taxes withheld from his paycheck : Don may not be the brightest candle on the cake. He has more taxes withheld from his paycheck so he will get large check come April from the Federal government

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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