Central Development Company just paid a dividend of $3.00 per share. The company is in a very profitable growth mode and expects that its dividend will grow 10% annualy over the next four years. In the spirit of under promising and over delivering, Central Development has told investors that after the fourth year it expects the annual dividend to grow t a more reasonable rate of 2% per year. Currently, the risk free rate is 2.5%, the market risk premium is 6.5% and Central's beta is 0.8.
How much are you willing to pay for Central's stock today?
Answer:
If you buy Central's stock today, how much will you be able to sell it for at the end of year 5?
Answer:
Please Show Work.
Central Development Company just paid a dividend of $3.00 per share. The company is in a very profitable growth mode and expects that its dividend will grow 10% annualy over the next four years. In the spirit of under promising and over delivering, Central Development has told investors that after the fourth year it expects the annual dividend to grow t a more reasonable rate of 2% per year. Currently, the risk free rate is 2.5%, the market risk premium is 6.5% and Central's beta is 0.8.
How much are you willing to pay for Central's stock today?
Answer:
If you buy Central's stock today, how much will you be able to sell it for at the end of year 5?
Answer:
Please Show Work.
Related questions
1. Portman Industries just paid a dividend of $3.60 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 20.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 4.00% per year. The risk-free rate is 5.00%, the market risk premium is 6.00%, and Portman's beta is 1.80. Assuming the market is equilibrium, use the information just given to find :
| Term | Value |
| 1a.Dividends one year from now (D1) | ? |
| 1b.Horizon Value | ? |
| 1c.Intrinsic value of portmanâs stock | ? |
2. What is the expected dividend yield for Portman's stock today?
a. 11.80
b. 13.14
c. 9.44
d. 11.35
