1 answer

(TCO D) XYZ company paid a dividend of $4.37 in the past 12 months, and it...

Question:

(TCO D) XYZ company paid a dividend of $4.37 in the past 12 months, and it has a growth rate of 6.5 percent. The stock currently sells for $175.

Using the constant-growth DDM, calculate the current price of the stock. You must show your work.


Answers

Given that the recent dividend is $4.37
Growth rate is 6.5%
Expected dividend is (Recent dividend)*(1+Growth rate)=4.37*(1+6.5%)=4.65405
Current price of the stock=$175

According to the constant growth DDM model:
Current price = (Expected Dividend)/(Required Return - growth rate)
Current price and growth rate are already given, so we can determine the required return using the constant growth dividend discount model formula
Now, current price = (Expected Dividend)/(Required Return - growth rate)
=>175= (4.65405)/(Required Return - 6.5%)
=>(Required Return - 6.5%)=(4.65405)/175
=>Required Return =(4.65405)/175 +6.5%
=>Required Return =0.026594571 +6.5%
=0.091594571 or 9.16% (Rounded to two decimal places)

.

Similar Solved Questions

2 answers
A wheel that is initially at rest has forces applied to it, as shown in (Figure...
A wheel that is initially at rest has forces applied to it, as shown in (Figure 1), and it begins to rotationally accelerate. Calculate the net torque about the axle of the wheel shown in (Figure 1). Assume that a friction torque of 0.45 m⋅N opposes the motion. Express your answer using two si...
1 answer
Soothing Smoothie Inc. operates small stores in strip malls. It uses smoothles (units) sold as its...
Soothing Smoothie Inc. operates small stores in strip malls. It uses smoothles (units) sold as its measure of activity. Quarterly planning budget amounts and actual results for 3rd quarter of 20X1 are given in the table below. Flexible Actual Results Revenue & Spending Variances budget Activity ...
1 answer
Why am I getting this wrong? It is my belief that the hydrophilic and charged residues...
Why am I getting this wrong? It is my belief that the hydrophilic and charged residues would be on the exterior, and they hydrophobic ones would be on the interior....
1 answer
A 25.0-mL sample of a 0.310 M solution of aqueous trimethylamine is titrated with a 0.388...
A 25.0-mL sample of a 0.310 M solution of aqueous trimethylamine is titrated with a 0.388 M solution of HCI. Calculate the pH of the solution after 10.0, 20.0, and 30.0 mL of acid have been added; pK_b of (CH_3)_3N = 4.19at 25degree C. pH after 10.0 mL of add have been added: pH after 20.0 mL of add...
1 answer
L ugainst PIu (D) None of these becaus aBan What is one simple ways of attenuating Pseudorabies virus? 9. l ugainst PIu (D) None of these becaus aBan What is one simple ways of attenuating P...
l ugainst PIu (D) None of these becaus aBan What is one simple ways of attenuating Pseudorabies virus? 9. l ugainst PIu (D) None of these becaus aBan What is one simple ways of attenuating Pseudorabies virus? 9....
1 answer
In the diagram to the right both goods are normal goods. 1.) Use the 3-point curved...
In the diagram to the right both goods are normal goods. 1.) Use the 3-point curved line drawing tool to draw two additional indifference curves each tangent to a different budget constraint reflecting the effects of changing income on goods X and Y. Properly label these indifference curves in order...
1 answer
Please help to solve this. thank you A6. Define steady state error. (around 50 words) (5...
please help to solve this. thank you A6. Define steady state error. (around 50 words) (5 marks) A7. What is the steady-state error to a constant reference input, r(t) = 3cm 10), for the following feedback positioning system? (10 marks) R(s) E(s) Y(s) 10 S+1 M...
1 answer
How much will the coupon payments be of a 15-year $500 bond with a 4.5% coupon...
How much will the coupon payments be of a 15-year $500 bond with a 4.5% coupon rate and quarterly payments? O A. $1.88 O B. $11.25 OC. $22.50 O D. $5.63...
1 answer
Question 3 4 pts You have found that the pain killer, acetaminophen, has an absorbance in...
Question 3 4 pts You have found that the pain killer, acetaminophen, has an absorbance in the UV range of light and want to use it as a test compound for your measurement technique. The suggested procedure involves the use of unfamiliar glassware, a separatory funnel. Look up a separatory funnel and...
1 answer
The first two pictures are different questions and the rest of the pics are the parts...
The first two pictures are different questions and the rest of the pics are the parts that go with both of them. To test Ho u 20 versus Hu<20, a simple random sample of size n=16 is obtained from a population that is known to be normally distributed. Answer parts (a)-(d). Click here to view the t...
1 answer
Which of the following mappings are homomorphisms? Monomorphisms? Epimorphisms? Isomorphisms? a) ...
Which of the following mappings are homomorphisms? Monomorphisms? Epimorphisms? Isomorphisms? a) G= (R-(0), .), H= (R+,-); φ: G→H is given by φ(x)=국 b) Ga(R" ,-); ф: G-* G is given by ф(x)-Vx c) G-group of polynomials p(x) with real coefficients, under addition of...
1 answer
Comapare the attitude of the speaker to the reader Dulce et Decorum Est and In flanders...
comapare the attitude of the speaker to the reader Dulce et Decorum Est and In flanders field...
1 answer
Using average bond enthalpies (linked above), estimate the enthalpy change for the following reaction: 2CO(g) +...
Using average bond enthalpies (linked above), estimate the enthalpy change for the following reaction: 2CO(g) + 2NO(g)2CO2(g) + N2(g) kJ Bond Bond Energy (kJ/mol) C=C 602 H-H 436 C-H 413 C-C 346 Using average bond enthalpies (linked above), estimate the enthalpy change for the following reaction: I2...
1 answer
Question 6 (1 point) What mass of zinc (in grams) is required to react completely with...
Question 6 (1 point) What mass of zinc (in grams) is required to react completely with 22.9 ml of 3.2 M HER The unbalanced reaction for this conversion is Zn(s) + HCl(ag)H2lg)ZnCl-laa) Your Answer: Answer Save...
1 answer
Calculate the small-signal voltage gain vo/ v, in the circuit shown below. (20 pts) 5. Ik...
Calculate the small-signal voltage gain vo/ v, in the circuit shown below. (20 pts) 5. Ik 2 iB 2 KR 5k12...