You own a stock that you are considering selling

Assignment Help Financial Management
Reference no: EM131575518

You own a stock that you are considering selling. The current dividend is $1.10/share. Your required return for this stock is 7%. The current market price of the stock is $23.50. Consider each of the following situations separately.

a. If the dividend is fixed, what is the value of the stock? Should you sell it?

b. If the dividend grows at 2% indefinitely, what is the value of the stock? Should you sell it?

c. If the dividend grows at 5% for the first two years and then 2% indefinitely, what is the value of the stock? Should you sell it?

Please show work so I can understand how to do this problem,

Reference no: EM131575518

Questions Cloud

How much will they need to save each year : If they make annual payments into a savings plan, how much will they need to save each year
What is principal balance on the loan : In 16 years you decide to sell your house and pay off the mortgage. What is the principal balance on the loan?
What is the company cost of equity : If the stock sells for $45 a share, what is the company's cost of equity?
Included in the cash flow analysis of new product : Which of the following items should NOT be included in the cash flow analysis of a new product?
You own a stock that you are considering selling : You own a stock that you are considering selling. The current dividend is $1.10/share. If the dividend is fixed, what is the value of the stock?
The bonds make semiannual payments-common stock-debt : Debt: 4,500 8.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 102 percent of par; the bonds make semiannual payments.
Number of securities can influence risk management : explain how different asset classes and the number of securities can influence risk management.
Being subsidiary manager at multinational : If you were a subsidiary manager at a multinational, what are the lessons you can draw from "being a subsidiary manager at a multinational"
What is bank cost of preferred stock : Holdup Bank has an issue of preferred stock with a $9 stated dividend that just sold for $85 per share. What is the bank's cost of preferred stock?

Reviews

Write a Review

Financial Management Questions & Answers

  Considered to be the least risky

Which of the following are considered to be the least risky?

  What is williamson cost of equity capital

Williamson is subject to a corporate tax rate of 35 percent.? What is Williamson’s cost of equity capital??

  Compounded daily on its savings accounts

How much will you have in the account in 4 years? How much will you have in the account in 12 years?

  What is expected return of your portfolio

What is the expected return of your portfolio if Jacob, Bella, and Edward have expected returns of 0.08, 0.17, and 0.16, respectfully?

  Classified in terms of formation-performance-enforceability

Ed, a businessperson, is a friend of Fran, the owner of a candy store. Every day, Ed spends five minutes in Fran’s candy store, looking at the candy and usually buying one or two candy bars. One afternoon, Ed goes into the store, looks at the candy, ..

  First want to compare with that of other ski shops

Suppose you are a financial detective. Which ratio would you first want to compare with that of other ski shops? Days Sales Outstanding, inventory turnover.

  What is the sensitivity of ocf to changes in quantity sold

Consider a 5-year project with an initial fixed asset investment of $350,000, straight-line depreciation to zero over the project’s life, a zero salvage value, a selling price of $29, variable costs of $21, fixed costs of $139,700, a sales quantity o..

  Investment to cover cost of your childs college education

Assume the total cost of a college education will be $410,000 when your child enters college in 15 years. You presently have $68,000 to invest. Required: What annual rate of interest must you earn on your investment to cover the cost of your child’s ..

  Nonconstant growth-expanding rapidly and currently needs

Farrow Corporation is expanding rapidly and currently needs to retain all of its earnings; what is the value of the stock today?

  What are examples of the required rate of return

What are examples of the required rate of return? Explain the difference between a joint venture and a strategic alliance.

  Make two equal quarterly deposits

One year from today you must make a payment of $5,000. To prepare for this payment, you plan to make 2 equal quarterly deposits, at the end of Quarters 1 and 2, in a bank that pays 6% nominal interest, compounded quarterly. How large must each of 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