Purchase Solution

Stock Price

Not what you're looking for?

Ask Custom Question

You believe that Nonstick Gum Factory will pay a dividend of $2 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 6 percent a year in perpetuity. If you require a return of 12 percent on your investment, how much should you be prepared to pay for the stock?

Purchase this Solution
Solution Summary

This solution calculates the stock price of a company based on dividend payments, growth rate and required rate of return.

Solution Preview

To solve this problem (a growing perpetuity) the following formula ...

Purchase this Solution
Free BrainMass Quizzes
Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Stock Price After Options are Exercised

    183927 Stock Price After Options are Exercised Yert Corporation issues 100 stock options to its CEO on January 1, 2005. The stock options have an exercise price of $50 and the current stock price is $50 at the grant date.

  • Warrants

    b) If the stock price is above the exercise price of the warrant, the lower bound on the price of the warrant is the difference between the stock price and the exercise price.

  • Return on Preferred Stock

    dividend yield of this stock Dividend yield= Dividend/ Current price= 12% =8/66.67 Answer: Dividend yield= 12% capital gains yield of this stock Capital gains yield=Change in stock price/Current stock price Since the price of

  • Preferred Stock calculations

    Capital gains yield=Change in stock price/Current stock price Since the price of the stock does not change the capital gains yield= 0%=0/66.67 Answer: capital gains yield=0% e. What is the expected rate of return of this stock?

  • Valuation of Preferred Stock - Current and original Value

    Preference stock formula is Yield = Fixed Dividend / Price of Preferred Stock What was the original issue price? 6% = $6 / Price So we get original issue price = $6/6%=$100 What is the current value of this preferred stock?

  • Stock Splits and Stock Dividends for Roll Corporation

    (b) Share price after 15% stock dividend = 78/(1+15%) = 78/1.15 = $67.83 (c) Share price after 42.5% stock dividend = 78/(1+42.5%) = 78/1.425 = $54.74 (d) Reverse stock split share price = 78*7/4 = $136.50 The solution computes share price under

  • Variables Affecting Option Price

    A call option gives the holder the right to purchase the stock at a lower price (Exercise price) than the current stock price. The higher the stock price, the higher is the call value.

  • Preferred stock- price, dividend yield, capital gains yield

    Capital gains yield=Change in stock price/Current stock price Since the price of the stock does not change the capital gains yield= 0% =0/66.67 Answer: capital gains yield= 0% e.

  • The answer to preferred stock

    3.If the yield on the Standard & Poor's Preferred Stock Index declines how will the price of the preferred stock be affected? 1. What was the original issue price?

  • Preferred Stock Value

    If the yield on the Standard & Poor's Preferred Stock Index declines, how will the price of the preferred stock be affected? What was the original issue price?

View More Related Solutions