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Dividend Valuation Model for New Public Issue

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15. The investment banking firm of Luther King, Inc., will use a dividend valuation model to appraise the shares of the Pyramid Corporation. Dividends at the end of the current year will be $1.20. The growth rate is 9 percent and the discount rate is 13%.

a. What should be the price of the stock to the public?

b. If there is a 6 percent total underwriting spread on the stock, how much will the issuing corporation receive?

c. If the issuing corporation receives a net price of $29 (proceeds to the corporation) and there is a 6 percent underwriting spread, what would be the price of the stock to the public?

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Solution Summary

The solution computes Dividend Valuation Model to appraise the share,underwriting share.