Purchase Solution

What is the price of a stock with nonconstant growth?

Not what you're looking for?

Ask Custom Question

19. Nonconstant Growth. You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of the next 3 years. You believe the stock will sell for $20 at the end of the third year.
a. What is the stock price if the discount rate for the stock is 10 percent?
b. What is the dividend yield?

Purchase this Solution
Solution Summary

This solution shows how to determine the stock price if the discount rate for the stock is 10 percent and the dividend yield of the stock. Step-by-step calculations and answers are provided.

Solution Preview

Nonconstant Growth
You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of the next 3 years. You believe the stock will sell ...

Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

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.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

View More Free Quizzes
Related BrainMass Solutions

  • Nonconstant and Very High Dividend Growth

    As a result, forecast dividends are DIV1 = $2, DIV2 = $2.50, and DIV3 = $18. What is the stock price if the discount rate is 12%? 2. Dividend Growth. Grandiose Growth has a dividend growth rate of 25%. The discount rate is 10%.

  • Stock Valuation

    Nonconstant Growth Stock Price The price will be the present value of all the dividends.

  • Portfolio Required Return, CAPM, Beta, Inonconstant Growth, Valuation, Preferred Stock

    PREFERRED STOCK RETURNS Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100.The stock pays a quarterly dividend of $2, and its current price is $80. a. What is its nominal annual rate of return? b.

  • Stock Valuation: Nonconstant Growth

    207177 Stock Valuation: Nonconstant Growth Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 15 years, because the firm needs to plow back its earnings to fuel growth.

  • Problems on Stocks, Bonds, Corporate Valuation

    Assuming the market is in equilibrium, what does the market will be the stock price at the end of 3 years? (That is, what is P3?)

  • Finance questions

    The stock just paid a dividend of $ 1.00 a share ( i. e., D0 =$ 1.00). The dividend is expected to grow at a constant rate of 10% a year. What stock price is expected 1 year from now? What is the required rate of return on the company's stock?

  • Finance: NPV, Present value, YTM and Bond Evaluation

    If the required return on the stock is 12 percent, what is the current share price? 14.) Supernormal Growth. Marcael Co. is growing quickly.

  • Hart Enterprises recently paid a dividend, of $1.25. It exp

    436264 Hart Enterprises recently paid a dividend, of $1.25. It expects to have nonconstant growth of 20% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 10%. A.

  • Finance Questions

    One category of nonconstant growth stock is a "supernormal" growth stock which has one or more years of growth above that of the economy as a whole, but at some point the growth rate will fall to the "normal" rate. 12.

View More Related Solutions