What is the answer for : 1. The next dividend payment by Halestorm, Inc., will b
ID: 2650125 • Letter: W
Question
What is the answer for :
1. The next dividend payment by Halestorm, Inc., will be $1.72 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $33 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return
%
2.Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $10 per share dividend 10 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 11.5 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Current share price
$
3.Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 10 percent on the company
1. The next dividend payment by Halestorm, Inc., will be $1.72 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $33 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Answer:
Given :
Next dividend (D1) = $1.72
Growth rate (g) = 4% =0.04
Current Price (P0) =$33
Calculation of Required return using the formula :
Required Return = (D1 /P0)+g
= (1.72 / 33) + 0.04
= 0.0921
= 9.21%
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