Calculate the current stock price, Cost Accounting

Assignment Help:

The Bloomington Electric Company operates in a stable industry and therefore has predictable dividend growth of 8% per year. The most recent annual dividend was paid yesterday in the amount of $4. Assume the appropriate discount rate is 15%.

 What is the current stock price?

  1. Assuming the annual growth rates for the next three years is 20% each year; but starting the fourth year and after the growth rate remains constant at 8%. What is the current stock price under this scenario?
  2. Assuming a dividend growth rate of 8%, what is the dividend yield of this stock if the current stock price is $40?

Answer

a)      Current Stock Price=Dividend Received/Dividend Growth Rate =4/.08 =50

  b)

Year

Dividend

D.F

PV

1

4.8

0.869565

4.173913

2

5.76

0.756144

4.355388

3

6.912

0.657516

4.544752

4

86.4

0.571753

49.39948

 

 

 

62.47353

b)   ividend for infinite stream at 8% from 4th year =Dividend of that year /Rate of dividend

                                                                                        =6.91/.08

                                                                                        =86.4

c)      Dividend Yield =Dividend Received/Stock Price

                          =4/40

                          =10%


Related Discussions:- Calculate the current stock price

Component of fixed overheads variance, Component of Fixed Overheads Var...

Component of Fixed Overheads Variance Fixed Overhead Expenditure Variance The fixed overhead expenditure variance is the dissimilarity between the actual fixed expend

Budget, budget preparation

budget preparation

Determine the total compensation cost, On January 1, 2013, VKI Corporation ...

On January 1, 2013, VKI Corporation awarded 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. On the gr

#investment appraisal techniques, #what is the formula for calculating payb...

#what is the formula for calculating payback period and what are its limitations ?

What is operating costing, Describe Operating Costing The Chartered Ins...

Describe Operating Costing The Chartered Institute of Management Accountants, London defines "operating cost" as "the cost of providing a service." Services performed may be in

Master budget, What are the four elements of the budgeting cycle?

What are the four elements of the budgeting cycle?

Depreciation (to be computed) by slm method, sabonis consmetics co. purchas...

sabonis consmetics co. purchased machinery on december 31,2011, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each dec 31. an as

Prepare the franking account, XYZ Pvt Ltd is a private company incorporated...

XYZ Pvt Ltd is a private company incorporated in Australia, and manufactures handbags. The opening balance of XYZ Pvt Ltd's franking account on 1 July 2010 was $nil. During the 201

Relationship among financial accounting and cost accounting, Relationship a...

Relationship among Financial Accounting and Cost Accounting The difference among management and cost accounting may be highlighted by using a number of questions namely as;

Explain break-even revenue, Q. Explain Break-even revenue? Sales revenu...

Q. Explain Break-even revenue? Sales revenue earned would give no profit and no loss. It can be computed by multiplying break-even volume (above) by products selling price, or

Write Your Message!

Captcha
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