7. The Omnicam Corporation just paid a dividend of $2.30 per share. The dividend

Question

7. The Omnicam Corporation just paid a dividend of $2.30 per share. The dividends are expected to grow at 15 percent for the next eight years and then level off to a growth rate of 6 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

6. Freddy's BBQ Joint's stock currently sells for $51 per share. The market requires a return of 8.2 percent on the firm

7. The Omnicam Corporation just paid a dividend of $2.30 per share. The dividends are expected to grow at 15 percent for the next eight years and then level off to a growth rate of 6 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

6. Freddy's BBQ Joint's stock currently sells for $51 per share. The market requires a return of 8.2 percent on the firm

Explanation / Answer

7)

P8 = 2.3 * 1.15^8 * 1.06/0.14 -0.06 = 93.22372174

price of stock today

= 2.3* 1.15/1.14 + 2.3* 1.15^2/1.14^2 + 2.3* 1.15^3/1.14^3 + 2.3* 1.15^4/1.14^4 + 2.3* 1.15^5/1.14^5 + 2.3* 1.15^6/1.14^6 + 2.3* 1.15^7/1.14^7 + 2.3* 1.15^8/1.14^8 + 93.22372174/1.14^8

= 51.82

6)

price = D0 * (1+g)/r-g

51 = Do * (1+0.021)/0.082-0.021

D0 = 3.05 .....ans

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