A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?
A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?
a. $22.65
b. $20.43
c. $21.23
d. $12.50
A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?
A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?
| a. | $22.65 | |
| b. | $20.43 | |
| c. | $21.23 | |
| d. | $12.50 |
Related questions
A risk-free, zero-coupon bond with a face value of $1,000 has 15 years to maturity. If the YTM is 5.8%, which of the following would be closest to the price this bond will trade at?
| a. | $721 | |
| b. | $525 | |
| c. | $686 | |
| d. | $429 |
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A stock is expected to pay $1.25 per share every year indefinitely and the equity cost of capital for the company is 7.5%. What price would an investor be expected to pay per share ten years in the future?
a. $16.67
b. $25.01
c. $33.34
d. $41.68
| You are given the following information concerning Parrothead Enterprises: |
| Debt: | 10,600 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 108. These bonds pay interest semiannually. |
| Common stock: | 305,000 shares of common stock selling for $66.10 per share. The stock has a beta of 1.02 and will pay a dividend of $4.30 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. |
| Preferred stock: | 9,600 shares of 4.55 percent preferred stock selling at $95.60 per share. |
| Market: | A 10.4 percent expected return, a risk-free rate of 5.1 percent, and a 34 percent tax rate. |
