Ask Question
BusinessBusiness
24 February, 10:22

Connolly Co.'s expected year-end dividend is D1 = $1.60, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Connolly's expected stock price in 7 years, i. e., what is? a. $37.52b. $39.40c. $41.37d. $43.44e. $45.61

+3
Answers (1)
  1. 24 February, 10:30
    0
    What is Connolly's expected stock price in 7 years, i. e., what is?

    a. $37.52

    Explanation:

    Required rate of return it's equal to capital gains growths plus dividend yield

    Then 11% = capital gains + 6%, so the capital gains it's equal to 5%.

    First we need to find the stock price today with the information available about the value of the dividend:

    P0 = Div / (r-g) = $1,6 / (0,11-0,05) = $26,67

    This is the stock price today of the cash flow of dividend a growth rate of 5%

    To know the price at the year 7, it's necessary to find the future value applying the growth rate of 5%.

    P7 = P0 (1+r) ^7 = $26,67 * (1,05) ^7 = $37,52
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Connolly Co.'s expected year-end dividend is D1 = $1.60, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Fabien offers to sell his Graphic Signs, LLC, business to Hanna for $100,000. Hanna replies, "The price is too high. I will buy it for $75,000." Hanna has: a. accepted the offer. b. made a counteroffer without rejecting the offer. c.
Answers (1)
Who is following the law when it comes to protecting investors' funds?
Answers (1)
Suppose you wish to provide an accessor method for a boolean property finished, what signature of the method should be?
Answers (1)
A company has 1,500 shares of 7%, $100 par value preferred stock the company issued at the beginning of Year 1. All remaining shares are common stock.
Answers (1)
Stormie Zanzibar owns a bakery in the fictitious country of Olombia. Each month the government's market ministry mails her a large list of the regulated price of goods which include products like bread, muffins and flat bread.
Answers (1)
New Questions in Business
Scott Company had sales of $12,050,000 and related cost of goods sold of $7,100,000 for the year ending December 31, 20Y8. Scott provides customers a refund for any returned or damaged merchandise.
Answers (1)
Bill and sally kaplan have an annual spending plan that amounts to $104,000. if inflation is 4 percent a year for the next three years, what amount will the kaplans need for their living expenses three years from now?
Answers (1)
Which of the following describes the process whose ultimate result is Illustrated by the multiplier (the result being that gross domestic product (GDP) Increases by more than an initial increase in spending by Individuals, firms, or the government) ?
Answers (1)
On the first day of the fiscal year, a company issues a $5,000,000, 7%, five-year bond that pays semiannual interest of $175,000 ($5,000,000 * 7% * ½), receiving cash of $5,400,000.
Answers (1)
You have been placed in charge of all advertising for a product that has common appeal in different cultures around the world. You will most likely engage in a. global advertising. b. international advertising. c. national advertising. d.
Answers (1)
Home » Business » Connolly Co.'s expected year-end dividend is D1 = $1.60, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Connolly's expected stock price in 7 years, i. e.
Sign Up Forgot Password?