Apocalyptica Corporation is expected to pay the following dividends over the nex

Question

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterwards, the company pledges to maintain a constant 6.00 percent growth rate in dividends, forever.

If the required return on the stock is 9 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

$   

Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growth rate falling off to a constant 6.9 percent thereafter.

If the required return is 16 percent and the company just paid a $3.20 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterwards, the company pledges to maintain a constant 6.00 percent growth rate in dividends, forever.

Explanation / Answer

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterwards, the company pledges to maintain a constant 6.00 percent growth rate in dividends, forever.

Required:

If the required return on the stock is 9 percent, what is the current share price

P4 = D4(1 + g) / (R - g) = $3.20(1.06) / (.09 - .06) = $113.06

P0 = $5.40/ 1.09 + $16.40/ 1. 09^2 + $21.40 / 1. 09^3 + $3.20. / 1. 09^4 + $113.06/ 1. 09^4 =

Apocalyptica Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterwards, the company pledges to maintain a constant 6.00 percent growth rate in dividends, forever.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.