Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 8, Problem 19P
a)
Summary Introduction
To determine: The dividends for the next three years.
b)
Summary Introduction
To determine: The present value of dividend stream.
c)
Summary Introduction
To determine: The present value of expected future stock price.
d)
Summary Introduction
To determine: The maximum person X should pay.
e)
Summary Introduction
To determine: The present value of stock using constant growth model..
f)
Summary Introduction
To determine: Whether the value of this stock depend on how long person X plan to hold it.
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Additional Activities
Perform what is being asked in the following:
1. What will you pay today for a stock that is expected to make a P 45.00
dividend in one year if the expected dividend rate is 5% and you require a 12%
return on your investment?
2. XYZ Company's preferred stock is selling for P 60.00 a share. If the required
return is 8%, what will the dividend be two years from now?
3. Your broker is trying to sell you a stock with a current market price of
P 2,160.00 The stock's last dividend was P 53.25, and earnings and
dividends are expected to increase at a constant growth rate of 10%. Is the
stock fairly valued if the return is 13%? Explain why or why not.
Suppose a firm’s common stock paid a dividend of $2 yesterday. You expect the dividend to grow at 5% peryear for next 3 years, and, if you buy the stock, you plan to hold it for 3 years and then sell it.
A. Find the expected divided for next 3 yearsB. Given that the discount rate is 12 % and the dividends will be paid after every year find the present valueof the dividend streamC. If you plan to buy the stock and sell it after 3 years at $34.73, what is the most you pay for it?D. If the growth rate of the stock is 5%. What will be the present value of the stock? E. Is the value of the stock dependent on how long you plan to hold it? Show the calculations
You are analyzing Jillian's Jewlery (JJ) stock for a possible purchase. JJ just paid a dividend of $1.50 yesterday. You expect the dividend to grow at the rate of 6% per year for the next 3 years; if you buy the stock, you plan to hold it for 3 years and then sell it.a. What dividends do you expect for JJ stock over the next 3 years? In other words, calculate D1, D2, and D3. Note that D0 = $1.50.b. JJ's stock has a required return of 13% and so this is the rate you'll use to discount dividends. Find. the present value of the dividend stream; that is, calculate the PV Of D1, D2, and D3, and then sum these PVs.c. JJ stock should trade for $27.05 3 years from now (i.e., you expect P3 = $27.05). Discounted at a 13% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $27.05.d. If you plan to buy the stock, hold it for 3 years, and then sell it for $27.05, what is the most you should pay for it?e. Use the constant growth model to calculate…
Chapter 8 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 8 - Define each of the following terms: a. Proxy;...Ch. 8 - Two investors are evaluating General Electric’s...Ch. 8 - A bond that pays interest forever and has no...Ch. 8 - Explain how to use the free cash flow valuation...Ch. 8 - Thress Industries just paid a dividend of 1.50 a...Ch. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - A company currently pays a dividend of $2 per...Ch. 8 - EMC Corporation has never paid a dividend. Its...
Ch. 8 - Current and projected free cash flows for Radell...Ch. 8 - A stock is trading at $80 per share. The stock is...Ch. 8 - Constant Growth Valuation Crisp Cookwares common...Ch. 8 - Prob. 10PCh. 8 - Brushy Mountain Mining Companys coal reserves are...Ch. 8 - Prob. 12PCh. 8 - Nonconstant Growth Stock Valuation Simpkins...Ch. 8 - Prob. 14PCh. 8 - Return on Common Stock
You buy a share of The...Ch. 8 - Prob. 16PCh. 8 - Value of Operations
Kendra Enterprises has never...Ch. 8 - Free Cash Flow Valuation
Dozier Corporation is a...Ch. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 1MCCh. 8 - Prob. 2MCCh. 8 - Prob. 3MCCh. 8 - Prob. 4MCCh. 8 - Use B&M’s data and the free cash flow valuation...Ch. 8 - Prob. 6MCCh. 8 - Prob. 7MCCh. 8 - Prob. 8MCCh. 8 - Prob. 9MCCh. 8 - Prob. 10MCCh. 8 - Prob. 11MCCh. 8 - Prob. 13MCCh. 8 - (1) Write out a formula that can be used to value...Ch. 8 - Assume that Temp Force has a beta coefficient of...Ch. 8 - Prob. 16MCCh. 8 - Now assume that the stock is currently selling at...Ch. 8 - Prob. 19MCCh. 8 - Prob. 20MCCh. 8 - Prob. 21MC
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