Log in
Finance
1
answer
0
watching
54
views

(a) XYZ's common stock recently paid a dividend of $1.60 in the year just ended. Your analysis leads you to conclude that XYZ's dividends and earnings will grow at a rate of 4% indefinitely, and that 10% is a fair required rate of return on the stock. What value would you place on XYZ's common stock?

(b) XYZ's common stock is expected to pay a dividend of $1.60 in the coming year. Your analysis leads you to conclude that XYZ's dividends and earnings will grow at a rate of 4% indefinitely, and that 10% is a fair required rate of return on the stock. What value would you place on XYZ's common stock?

Watch
1
answer
0
watching
54
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Reid Wolff
Reid WolffLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

XYZ has a target capital structure of 42 percent common equity and the rest long term debt. The company's outstanding bonds have a yield to maturity of 4.4 percent. The company's common stock sells for $71.48 per share and are expected to pay a dividend of $1.53 this year. Those dividends are expected to continue to grow at a constant rate of 12.9 percent. Given its tax rate of 40 percent, what is XYZ's weighted average cost of capital? (Show your answer in decimal for to three places, e.g., 12.3% would be entered as 0.123)

Your analysis of the Janis Corporation, which paid a dividend of $3 in the year just ended leads you to the following projections: Dividends will grow at a rate of 20% next year, 10% the year after, 7% the following year, and then level off at a constant rate of 5% indefinitely. The fair required return on Sterling's common stock is 12%. Use the non-constant dividend valuation model to value the stock.

Part A:

Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $0.90; P0 = $47.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations.

Part B:

Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67; P0 = $45.00; and g = 8.00% (constant). What is the cost of equity from retained earnings based on the DCF approach?

Part C:

XYZ has a target capital structure of 62 percent common equity and the rest long term debt. The company's outstanding bonds have a yield to maturity of 7.9 percent. The company's common stock sells for $69.24 per share and are expected to pay a dividend of $1.51 this year. Those dividends are expected to continue to grow at a constant rate of 14.8 percent. Given its tax rate of 40 percent, what is XYZ's weighted average cost of capital? (Show your answer in decimal for to three places, e.g., 12.3% would be entered as 0.123)

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in