Skip to main content
M

Huang Company’s last dividend was $1.25. The dividend growth rate is expected to be constant at 27.5% for 3 years, after which dividends

Huang Company's last dividend was $1.25. The dividend growth rate is expected to be constant at 27.5% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (rs) is 11%, what is its current stock price
0
Save

3 Answers

B
Brandyn Moore PhD

Feb 20, 2025

Price of stock today = $53.29ExplanationThe Dividend Valuation Model(DVM) is a technique used to value the worth of an asset. According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.  This model would be applied as follows: PV from year 1 to 3Year                                              Present Value ( PV)1                   1.25 × 1.275  × 1.1^(-1) =        1.43582                  1.25 × 1.275^2  × 1.1^(-2)  =  1.64923                  1.25 × 1.275^3  × 1.1^(-3) =   1.894 Total                                                       4.979Year 4 and beyondThis will be done in two stepsStep 1D× (1+g)/k-g1.25 ×1.275^4/(0.11-0.06)=66.066Step 2Present Value in year 0=66.066  × 1.11^(-3) = 48.3068Total present value =   4.979 + 48.306= 53.286Price of stock today = $53.29            ... Show More
0

Want to answer this question?

Join our community to share your knowledge!

Log in Sign up

Categories

Tags

Related Questions

5
Huck Finn quotes about education.?

I need help finding 12 quotes that relate to the theme of education. I also need the page numbers if possible. Thank you...

10
Huh challenge ideas?

I have to roast this one person but I ve never actually talked to her, any generic roasts?

6
Hurry, hurry will make brainiest answer what is the function of the phrase ‘hoping for a few scraps of food” in the first sentence?

Hurry, hurry will make brainiest answer what is the function of the phrase "hoping for a few scraps of food” in the firs...

10
Husband likes hearing about my past sexual experiences?

Does anyone else husband or wife like hearing about your past sexual experiences?My husband loves when I tell him about...

3
Hushovd iron works has collected the following data for its thunderbolt line of products: direct materials standard10 pounds per unitdirect

Hushovd iron works has collected the following data for its thunderbolt line of products: direct materials standard10 po...

1
Hybridization of TeCl4?

Can you explain to me the process of getting the hybridization of TeCl4 and tell me the answer so I can see what I'm wor...

4
Hydrochloric acid ( 75.0 mL, 0.250M ) is added to 225.0mL of 0.050 M barium hydroxide. What is the concentration of excess H or OH-

Hydrochloric acid ( 75.0 mL, 0.250M ) is added to 225.0mL of 0.050 M barium hydroxide. What is the concentration of exce...

10
hydrocodone aka Vicodin how much is the street value ?

hydrocodone 7.5 750mg how much does one pill sell for on the street aka black market in NY ?class project not a drug use...

2
7
Hypotonic v.s. Hypertonic?

What IS hypotonic and hypertonic?