Beasley Ball Bearings paid a dividend of $4.00 last year. The dividend is expect
ID: 2766544 • Letter: B
Question
Beasley Ball Bearings paid a dividend of $4.00 last year. The dividend is expected to grow at a constant rate of 6% over the next 5 yrs required rate of return is 19%. Use Appendix B and round to 2 decimal places. a.) Compute the anticipated value of the dividends for the next 4 years. b.) Calculate the present value of the anticipated dividends at the discount rate. c.) Compute the stock at the end of the 4th year. d.) Calculate the present value at the discount rate. e.) calculate the current value of the stock. f.) calculate the current value.
Explanation / Answer
Solution.
A.
B.
C.
D5 = 5.35
= ($5.35 / .19 - .06 ) = ( $5.35 / .13 )
P $41.15.
D.
PV of P 4 for n = 4, i = 19%
$41.15 × .4986 = $20.51.
E.
Answer to part b (PV of dividends) $14.32
Answer to part d (PV of P 4 ) $20.51
Current value of the stock $34.83.
Year Dividend Growth Value of dividend D1 4.00 1.06 4.24 D2 4.24 1.06 4.49 D3 4.49 1.06 4.76 D4 4.76 1.06 5.05 D5 5.05 1.06 5.35