Ask Question
BusinessBusiness
5 December, 07:02

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 9 percent

+1
Answers (1)
  1. 5 December, 07:25
    0
    The stock is worth $17.50 per share today

    Explanation:

    The price per share today can be calculated using the DDM where expected dividends are discounted back to present value to calculate the share price. When the dividend growth becomes zero, we will calculate the terminal value at the end of Year 3 and discount it back too. The formula for price of the stock today is,

    P0 = D1 / (1+r) + D2 / (1+r) ^2 + D3 / (1+r) ^3 + [ (D4 / r) / (1+r) ^3]

    P0 = 1.45 / (1+0.09) + 1.5 / (1+0.09) ^2 + 1.53 / (1+0.09) ^3 +

    [ (1.6 / 0.09) / (1+0.09) ^3]

    P0 = $17.50
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next ...” 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
Although the courts seldom consider the adequacy of consideration, they may refuse to enforce an agreement which purports to exchange something of significant value for something of nominal value (sometimes called "a peppercorn").
Answers (1)
Barry often works outdoors, where he measures property boundaries for various clients. He also analyzes the land to determine whether it can be safely built on. His job is best described as.
Answers (1)
Mustafa, a 40-year old accountant, works for a large manufacturing firm. mustafa's wife, ana, paid nothing for the authorized baby immunizations for their children, amy and louise. amy and louise receive well-child pediatric care for $5 per visit.
Answers (1)
Assume that a consumer is currently maximizing satisfaction and attending both movies and basketball games.
Answers (1)
27. Average cost curves (except for average fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing.
Answers (2)
New Questions in Business
True or False: The basic economic theory of supply and demand suggests that when price drops, consumers will buy more and thus generate stronger demand.
Answers (1)
If you think carefully about what you're doing, always ask for advice when you need it, and keep asking questions, starting a business can be
Answers (2)
16. What size paper should you use for a legal document? A. 3" x 5" B. 8/2" x 11" C. 872" x 14" D. 74" x 1072"
Answers (2)
Assume an economy where there are two producers: a wheat producer and a bread producer. In a given year, the wheat producer grows 30 million bushels of wheat of which 25 million bushels are sold to the bread producer at $3 per bushel, and 5 million
Answers (1)
A company is just getting started and needs new equipment, but does not have a large amount of cash. Since the company business will also require frequent updating of the equipment, it is better to
Answers (1)
Home » Business » Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share.
Sign Up Forgot Password?