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?

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?
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

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 4^th 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

Overhead costs, Overhead Costs Introduction Overhead costs may be...

Overhead Costs Introduction Overhead costs may be defined like the net cost of indirect materials, indirect expenses and indirect labour. They may happen or be charged to

What is the amount of cost of goods manufactured, Wayne Company's beginning...

Wayne Company's beginning and ending inventories for the month of June were as follows: June 1 June 30 Work in progress $145,000 171,000 Finished Goods 85,000 78,000 Production

Direct materials and direct labor:, McDaniel Company manufactures 100-pound...

McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct materials and direct labor: Direct Materials (100 lbs. @ $1.00

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

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

Flexible budgets, Flexible budgets provide different information than stati...

Flexible budgets provide different information than static budgets. Discuss some of these differences. Is a flexible budget always better? Are there times when you’d recom

Management accounting, Management Accounting It is the part of account...

Management Accounting It is the part of accounting such provides special-reason statements and reports to other persons and management inside the organization. The informatio

Prepare cash budget of a company, Prepare Cash Budget of a Company The...

Prepare Cash Budget of a Company The given information concerned to the proposed budget for a company for the months ending on 31 December 1996. Additional Information

Sgtatement of Cash Flow, “The statement of cash flows is the easiest of the...

“The statement of cash flows is the easiest of the basic financial statements to prepare because you know the answer before you start. You compare the beginning and ending balances

Determine the amount of depreciation expense, Waylander Coatings Company pu...

Waylander Coatings Company purchased waterproofing equipment on January 6, 2013, for $320,000.The equipment was expected to have a useful life of four years, or 20,000 operating ho

Calculate the optimal re-order quantity, Mr. Marley is a wholesaler who buy...

Mr. Marley is a wholesaler who buys and sells a wide range of products, one of which is the Laker. Mr. Marley sells 24,000 units of the Laker each year at a unit price $20. Sales o

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages