Question 16 Dvorak Enterprises is expected to pay a stable dividend of $7 per sh

Question

Question 16

Dvorak Enterprises is expected to pay a stable dividend of $7 per share per year for the next 10 years. After that, investors anticipate that the dividends will grow at a constant rate of 2.1 percent per year indefinitely. If the required rate of return on this stock is 13 percent, what is the fair market value of a share of Dvorak?

Question 13

Last week, Onboard Co. has announced that the next two annual dividends will be in the amount of $2.3 and $4.19, respectively. After that, the dividends will increase by 3.6 percent annually. The required return on this stock is 12.98 percent. What is the current price per share? (Hint: draw this out on a timeline.)

Explanation / Answer

Answer 16

Stock Price => (7 + 2.1% ) / 13%

The fair market value of a share of Dvorak => $54.98 or $55

Answer 13

price => (2.3 * (1/1.1298) ) + (4.19 * ( 1/ 1.1298)2 + 3.6 / 12.98%

=> 2.3 *0.885 + 4.19 * 0.783 + 27.73

The current price per share => $33.05

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