Question 16 Dvorak Enterprises is expected to pay a stable dividend of $7 per sh
ID: 2758974 • Letter: Q
Question
Question 16
Dvorak Enterprises is expected to pay a stable dividend of $7 per share per year for the next 10 years. After that, investors anticipate that the dividends will grow at a constant rate of 2.1 percent per year indefinitely. If the required rate of return on this stock is 13 percent, what is the fair market value of a share of Dvorak?
Question 13
Last week, Onboard Co. has announced that the next two annual dividends will be in the amount of $2.3 and $4.19, respectively. After that, the dividends will increase by 3.6 percent annually. The required return on this stock is 12.98 percent. What is the current price per share? (Hint: draw this out on a timeline.)
Explanation / Answer
Answer 16
Stock Price => (7 + 2.1% ) / 13%
The fair market value of a share of Dvorak => $54.98 or $55
Answer 13
price => (2.3 * (1/1.1298) ) + (4.19 * ( 1/ 1.1298)2 + 3.6 / 12.98%
=> 2.3 *0.885 + 4.19 * 0.783 + 27.73
The current price per share => $33.05