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The constant dividends growth formula P0=Div1/(r-g) assumes

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The constant dividends growth formula P0=Div1/(r-g) assumes what?

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This solution is comprised of a detailed explanation to determine what the constant dividends growth formula assume.

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The constant dividends growth formula P0=Div1/(r-g) assumes what?

The formula assumes that the company will pay dividend in the next ...

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  • Calculate for the Common Stock Value

    Assume D1 is $2, what will be the new value of P0? a. Po= Div1/ (r-g) Dividend for next yea r = Div1 = $1.50 Cost of equity = r = 10% Growth rate of dividends/earnings = g = 5.00% Current stock price = Po = ?

  • Stock Valuation: Constant-Growth Model

    The Dividend Discount Model for constant growth rate of dividends is given by the equation Po= Div1/ (r-g) where Po= Current stock price Div1 = Dividend for next year r= discount rate =Cost of equity

  • Expected total return on stock

    The Dividend discount model is Po = D1/(r-g) D1= dividend next year = Dividend this year (D0) x (1+ growth rate) = $ 2.00 x (1+ 6%)= $2.12 g= growth rate = 6% P0= $40 r= to be determined If Do = $2.00, g (which is constant) = 6%, and Po

  • Dividend paid

    Let g be the growth rate r be the rate of return DIV1 be the dividend paid in first year P0 is the current price We have P0 = DIV1/(r - g) Eq(1) Note that r the rate of return must be greater than g the growth rate.

  • Stock Price

    =$1.00 Using the Dividend Discount (Constant Growth) Model Po= Div1/ (r-g) Dividend for next year= Div1 = $1.00 Cost of equity=market capitalization rate= r= 12% growth rate of dividends/earnings

  • Stock Valuations

    Dividends are expected to continue growing at the historic rate for the foreseeable future. P0= Div1/(Ke-g) =$36.38 =Answer Note: G=Growth =7% Ke= Cost of equity =12% Div1= Current dividend *(1+g) =1.819 b.

  • Stock price

    Assuming that g=5% and it is constant Po= Div1/ (r-g) Dividend for next year= Div1 = $2.10 Cost of equity= r= 12% growth rate of dividends/earnings= g= 5.00% Current stock price= Po= Plugging in the

  • Current value of a share

    d. 6 percent P0= Div1/(Ke-g) = N/A as growth = cost of equity Note: G=Growth 6% Ke= Cost of equity 6% Div1= Current dividend *(1+g) =5.3. e. 4 percent P0= Div1/(Ke-g)= N/A as growth = cost of equity.

  • Dividend payout ratio and stock price

    =Div0(1+g) P0= Market price G= growth Stock A Div1= 1(1.075) 1.075 Po= 1.075/(.15-.075)= $14.33 Stock B Div1= 1(1.033) 1.033 Po= 1.033/(.10-.033)= $15.42 This explains the Dividend payout ratio and stock price

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