domo44831 domo44831

Today at 6:59 AM
Business

Answered

The common stock of A.G. Tailor has a required return of 16 %. The latest press release stated that last year's dividend (D0) was $0.90 per share and that future dividends will increase by 15% for the following 3 years. After year 3, the dividend growth rate will be 3% indefinitely. What is one share of this stock worth to you today

Answer :

ewomazinoade ewomazinoade

Today at 7:04 AM

The worth of this share today is $9.61

The two-stage dividend growth model would be used to determine the value of the stock today. There are two stages in this model. In the first stage, there is a high rate of growth. In the second stage, high growth rate falls to a steady growth rate.

Stage 1 of growth

dividend in Y1 = 0.90 x 1.15 = 1.035

dividend in Y2 = 0.90 x 1.15^2 = 1.19

dividend in Y3 = 0.90 x 1.15^3 = 1.37

Stage 2 of growth

Y3 = (3.91 X 1.03) / (0.16 - 0.03) = 10.85

Find the present value of these cash flows

(1.035 / 1.16) + (1.19/ 1.16²) + (1.37 / 1.16³) + (10.85/1.16³) = $9.61

A similar question was answered here: https://brainly.com/question/14979036?referrer=searchResults

Answer Link

Other Questions

The decision to keep or drop products or services involves strategic consideration of all the following except: The desired inventory levels of the product. Pot

Which of the following is an example of nondiversifiable risk? (a) Risk resulting from a general decline in the stock market (b) Risk resulting from a news rele

In June of the current year, Susan’s mother gave her 100 shares of a listed stock. The donor’s basis for this stock, which she bought 10 years ago, was $4,000,

You are making an open box from a rectangular sheet of cardboard by cutting squares of equal length from each corner and folding up the sides. The dimensions of

⦁ Sc. 5, Lines 106–110: Read Hamlet’s oath very carefully and notice how faithfully and thoroughly he vows to seek the revenge the Ghost wants. Identify one thi

wh Questions. Narayan gets deeply into the working of swami mind

Page No.11 whatis thefellowing Roho ofRaho of 20m20m to2

how is the president of india elected?

अर्थव्यवस्थाचे आव्हाने

Simplify: (1/2^2+2/3y²) - (1/2x²-2/3y²)²please give answer in explanation

Thornton Industries began construction of a warehouse on July 1, 2016. The project was completed on March 31, 2017. No new loans were required to fund construct

Solve the following system of equations: x − 2y = 5 2x − 4y = 10

The thalamus relays sensory information to a.correct regions of the cerebral hemispheres b.relays motor information from the cerebellum and basal nuclei (basal

E16-25 (EPS with Convertible Bonds and Preferred Stock) On January 1, 2014, Crocker Company issued10-year, $2,000,000 face value, 6% bonds, at par. Each $1,000

Norma Company had 10,000 units in work in process at January 1 that were 50 percent complete. During January, 25,000 units were completed. At January 31, 6,000

The lab you work in has discovered a previously unidentified extracellular signal molecule called QGF, a 75,000-dalton protein. You add purified QGF to differen

Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats.Activity Cost PoolsEstimatedOverheadExp

The manager of a discretionary account places client funds in a suitable investment because it provides a higher commission than alternatives that are also suit

Assume that a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2012. On the acquisition date, the identifiable n

The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the investment alternatives they ma