Please help me question 14,15,17 thank you Dividlend adividend 12 According to t
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Please help me question 14,15,17 thank you Dividlend adividend 12 According to the constant growth dividend valuation model, what d is expect ed for a share that has a current price of$20 00, a required return of 14% and a growth rate of4%? 13.) The dividend on Bedford Motors ordinary shares will be SO.50 in l yer ycars. You know that you can sell a Bedford Motors share for $9.50 in 2 years and you rcquirea l7% return on your investment owmach woultou eoning to currently pay for a Bedford Motors share? nd S0.65 in 2 14. Kim's Kompany share is not expected to pay cash dividends for 3 years. In years 4, 5, and 6 the cash dividend will be $3.00 per year, and for year 7 the cash dividend will be $4.00 and then grow at 2 percent each year to infinity. If the required rate of return is in what is the upproximate current market price ofa Kim's Kompany ordinary share? 15. The latest dividend paid by Angus Company is 40 cents and the company retains 2S% of its earnings each year, which required rate of return on Angus Company's shares s i 5% pa, what will the price of Angus shares be? is invested to earn a rate of return of 20% pa. Assuming the 6.) The XYZ Corporation paid a cash dividend of $1.80 for the fiscal year just completed. It is estimated that this firm's dividends will grow at 5% per year for the foreseeable future. If you are considering buying XYZ's ordinary shares, and, because of the risks involved, you require a return of at least 15%, what is the most ou should be illin to a forthis share? A new firm's share is expected to pay cash dividends of $O.50 at the end of its first year of business, $O.75 at the end of the second and third year, $1.00 at the end of ycars four and five, and $1.25 starting in year six and for cach year thereafter for the forcseeable future. If the required rate of return is 14%, what is the approximate current market value of this 17. firm's ordinary shares? 18. The current cash dividend for Huntress Construction's ordinary shares is in this dividend is expected to be 10% for yeas l' 2, and 3; then it will drop to 4% for years 4 and 5, after which it is expected to be 2% to "infinity" if the required rate of retum on this firm's ordinary shares is 15%, what is the approximate current market value of the share? i9.) If the current price of a share is $17.50, the anticipated next dividend is $1.40, and the 20. The Bobber Cricket Card Co. is facing some tough times. It just paid a 5 cent dividend, 21. What constant growth rate in dividends is expected for a share valued at $32.00 ifnext expected constant growth rate is 4%, whats return? but it expects that to decline by 7% forever. The current discount rate for Bobber is 10%. What is the value of a share of Bobber? year's dividend is forecast at $2.00 and the appropriate discount rate is 13%?Explanation / Answer
14) $ 25.39 Working: a. Present value of 7 Years dividend: Year Dividend Discount factor Present Value a b c=1.12^-a d=b*c 4 $ 3 0.6355 $ 1.91 5 $ 3 0.5674 $ 1.70 6 $ 3 0.5066 $ 1.52 7 $ 4 0.4523 $ 1.81 Total $ 6.94 b. Terminal Value of dividend: Terminal Value = D7*(1+g)/(Ke-g) Where, = 4*(1+0.02)/(0.12-0.02) D7 $ 4 = $ 40.80 Ke 12% g 2% c. Present Value of terminal value = $ 40.80 x 0.4523 = $ 18.46 d. Total present value of dividend = $ 6.94 + $ 18.46 = $ 25.39 15) $ 4.20 Working: a. Growth rate = Retained Earning x rate of return = 25% x 20% = 5% b. As per capital asset pricing model, Current Value of dividend = D0*(1+g)/(Ke-g) Where, = 0.4*(1+0.05)/(0.15-0.05) D0 $ 0.40 = $ 4.20 g 5% Ke 15% 17) $ 7.27 Working: a. Present value of 5 Years dividend: Year Dividend Discount factor Present Value a b c=1.14^-a d=b*c 1 $ 0.50 0.8772 $ 0.44 2 $ 0.75 0.7695 $ 0.58 3 $ 0.75 0.6750 $ 0.51 4 $ 1.00 0.5921 $ 0.59 5 $ 1.00 0.5194 $ 0.52 Total $ 2.63 b. Terminal Value of dividend: Terminal Value = D5/Ke Where, = 1.25/14% D5 $ 1.25 = $ 8.93 Ke 14% c. Present Value of terminal value = $ 8.93 x 0.5194 = $ 4.64 d. Total present value of dividend = $ 2.63 + $ 4.64 = $ 7.27