Business, 02.04.2020 02:15 kingnya63

Santa Klaus Toys just paid a dividend of $3.10 per share. The required return is 9.2 percent and the perpetual dividend growth rate is 4.0 percent. What price should this stock sell for five years from today?

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Answer from: izaguirrelopez3

The price of the stock 5 years from today will be $75.43

Explanation:

The perpetual dividend growth means that the stock's dividends will grow at a constant rate forever. For such a stock, we use the constant growth model of DDM. The formula for price today using the constant growth model is:

P0 = D1 / r - g

Where D1 is the dividend in the next period or Year 1 or D0 * (1+g).

To calculate the price of the stock 5 years from now, we will use D6.

The price of the stock 5 years from now is:

P = 3.1 * (1+0.04)^6 / 0.092 - 0.04

P = $75.432 rounded off to $75.43

Answer from: kaffolter25

Five years form today the stock will sell for $75.38

Explanation:

Given D0 $3.10, r 9.2%, g 4.0%

Stock price? 5 years from today

The DDM will be used as it derives the stock price by discounting future dividends at the required return .

Need to discount future dividends to year five to find stock price

Find D6

3.10*(1.04)^6 =$3.92

DDM formula : Sp = D1/ r - g

= 3.92/0.092-0.04

=$75.38

Answer from: Quest

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

Answer from: Quest

answer; capital structure decision;

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Santa Klaus Toys just paid a dividend of $3.10 per share. The required return is 9.2 percent and the...

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