Question

Woidtke Manufacturing's stock currently sells for $29 a share. The stock just paid a dividend of $2.60 a share (i.e., D0 = $2.60), and the dividend is expected to grow forever at a constant rate of 6% a year. (a) What stock price is expected 1 year from now? Do not round intermediate calculations. (b) What is the estimated required rate of return on Woidtke's stock? Round your answer to the nearest cent.

Answer 1

What stock price is expected 1 year from now? $ 37.1

What is the estimated required rate of return on Woidtke's stock? 15.50%

Explanation:

A stock market is where investors meet to buy and sell shares. Stocks are an equity investment represented the part ownership in the corporation and entitles you to part of that corporation's earnings and assets

A dividend is the payment by a corporation to its shareholders, as a distribution of profits. A shareholder is individual or institution legally owns one or more shares of stock in corporation.

Stock price or share price is the price of a single share of a number of saleable stocks of a company, derivative or other financial asset.

Woidtke Manufacturing's stock currently sells for $29 a share. The stock just paid a dividend of $2.60 a share (i.e., D0 = $2.60), and the dividend is expected to grow forever at a constant rate of 6% a year.

(a) What stock price is expected 1 year from now? Do not round intermediate calculations.

$29*1.06 = 37.1$

$ 37.1

(b) What is the estimated required rate of return on Woidtke's stock? Round your answer to the nearest cent.

$=\frac{(2.60*1.06)}{29} + 0.06$

$= 15.50$ %

Learn more about stock price : brainly.com/question/2017025

#LearnWithBrainly

Answer 2

Answer: Price after 1 year = $24.83

Explanation:

Return = [D1/P0 ]+ g

= [(3*1.08)/23] + 0.08

= 22.09%

We assume the return is same for next year as well.

Thus,

r = [D2/P1] + g

22.09% = (3*1.082/P1) + 8%

P1 = $24.83

Thus, price after 1 year is $24.83