Reference no: EM131052250
Valuation of Common
Dividend and Gordon Model Application
1) You estimate a company’s earnings and dividends will grow at a constant rate of 4% and want to determine the value of the stock. The company paid a dividend yesterday of $7 per share. The current10 year treasury rate is 2.3%, and the company’s beta is .6. Given market conditions, you estimate a required return on the market of 10%.
2) If your estimate of earnings and dividend growth rate changes to 6% per year, what will your estimated stock value be?
3) If your estimate of earnings and dividend growth rate changes to 2% per year, what will your estimated stock value be?
4) If interest rates rise and the 10 year treasury yields 2.7% and the required return on the market increases to 10.4%, what will your estimated stock value be? (Assume a 2% constant growth rate in earnings and dividends.)
5) If interest rates fall, and the 10 year treasury yields 2% and the required return on the market falls to 9.7%, what will your estimated stock value be? (Assume a 2% constant growth rate in earnings and dividends.)
6) If investors grow more risk averse and the required return on the market increases to 12%, what will your estimated stock value be? (Assume a 2% constant growth rate in earnings and dividends and a 2%10 year Treasury yield.)
|
Value lodges owns an economy motel chain
: Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,040,000; Value Lodges estimates furnishing for the motel will cost an additional $720,000 and will require repla..
|
|
Compute payments required for first six years on loan term
: You have been offered a GPM loan that is originated for $150,000 at 7 percent for 30 years. Payments are scheduled to graduate at the rate of 7.5 percent for the first five years of the loan. Compute the payments required for the first six years on t..
|
|
Which is the more attractive investment
: With an interest rate of 12%, which is the more attractive investment, given that they are equally risky? Investment A: An ordinary annuity of $5,000 for 5 years, followed by a two---year annuity of ---$2,000; Investment B: An annuity due of $5,000..
|
|
What is the market value of the firms common equity
: Assume an all equity firm has been growing at a 15 percent annual rate and is expected to continue to do so for 3 more years. At that time, growth is expected to slow to a constant 4 percent rate. The firm's beta is 1.25, the risk-free rate is 8 perc..
|
|
Valuation of common-dividend and gordon model application
: You estimate a company’s earnings and dividends will grow at a constant rate of 4% and want to determine the value of the stock. The company paid a dividend yesterday of $7 per share. The current10 year treasury rate is 2.3%, and the company’s beta i..
|
|
Consider european call option on non-dividend-paying stock
: Consider a European call option on a non-dividend-paying stock where the stock price is $52, the strike price $50, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is one year. What is the value of the option to the buyer if..
|
|
About the unusual dividend policy
: Flower Corp has an unusual dividend policy. It plans to pay a dividend of $5 per year for the first 5 years. The company will then grow the dividends at a rate of 6.5% per year, forever. If investors require a 12% return, what is the current price of..
|
|
Major differences between these two market indicators
: The Dow Jones Industrial Average and the Standard & Poor's Industrial Index have a number of similarities and differences. Discuss at least two major similarities and major differences between these two market indicators.
|
|
Dividend payment-what is the current value of the stock
: The next dividend payment by Gold Corp. will be $1.75 per share. The dividends are expected to maintain a 3% growth rate. If investors require a 10% return, what is the current value of the stock?
|