🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Finance
1
answer
0
watching
430
views
1 Jan 2018

The cash dividends of Stephanie Corporation have been growing at a rate of 25 percent for the last few years. Analysts expect this rate to continue for five more years and then fall to a more normal growth rate of 5 percent thereafter. The risk free rate of return is 4%. The market rate of return is 8.5%. The beta for the stock is 1.25. If the Stephanie Corporation has a current cash dividend of 25 cents per share per quarter, what is the present value of one share of its common stock?

Watch
1
answer
0
watching
430
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Nestor Rutherford
Nestor RutherfordLv2
4 Jan 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

General Cereal common stock dividends have been growing at an annual rate of 7 percent per year over the past 10 years. Current dividends are $1.70 per share. What is the current value of a share of this stock to an investor who requires a 12 percent rate of return if the following conditions exist?

A. Dividends are expected to continue growing at the historic rate for the foreseeable future.

B. The dividend growth rate is expected to increase to 9 percent per year.

C. The dividend growth rate is expected to decrease to 6.5 percent per year.

Sea Side, Inc., just paid a dividend of $1.96 per share on its stock. The growth rate in dividends is expected to be a constant 3.1 percent per year indefinitely. Investors require a return of 25 percent on the stock for the first three years, then a 20 percent return for the next three years, and then a 18 percent return thereafter. What is the current share price?

Suppose that NVIDIA Corporation (NVDA)stock is selling for $150.00. Analysts believe that the growth ratefor NVDA will be 20% next year, 30% for the following 4 years, 10%for the following two years, and thereafter the growth rate will be6% indefinitely. NVDA will pay a cash dividend of $.65 per sharenext year. Thereafter the dividend will grow by the same rate asthe company. Stockholders require a return of 16 percent onNVIDIA’s stock.

Required:

  1. Based on the above assumptions, determine theprice of NVIDIA’s common stock.
  2. Explain whether an investor should buy thestock.

Related Documents

FIN 300 Lecture Notes - Lecture 8: Stock Valuation, Dividend Policy, Growth Stock
bronzemule144
FIN 300 Lecture Notes - Lecture 7: Dividend Yield, Preferred Stock, Common Stock
mauvehound402
FIN 300
Final Exam
Study Guide
FIN 300 Study Guide - Final Guide: Interest, Risk Premium, Tax Shield
skydolphin894

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in