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den301095 [7]
2 years ago
10

The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 1

8 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $3.20 per share. What is the current value of one share of this stock if the required rate of return is 8.70 percent
Business
1 answer:
Keith_Richards [23]2 years ago
7 0

Answer:

$259.34

Explanation:

the value of the stock can be determined using the two stage dividend discount model.

In the first stage, the present value would be determined using a discount rate of 18%.

In the second stage, the present value would be determined using a discount rate of 6%.

Values from the first and second stage would be added together to determine the value of the stock

First stage

Present value in year 1 = ($3.2 x 1.18) / 1.087 = $3.47

Present value in year 2 = ($3.2 x 1.18²) / 1.087² = $3.77

Present value in year 3 = ($3.2 x 1.18³) / 1.087³ = $4.09

Present value in year 4 = ($3.2 x 1.18^4) / 1.087^4 = $4.44

Second stage

($3.2 x 1.18^4 x 1.06) / (0.087 - 0.06) = 243.57

Value of the stock = $3.47 + $3.77 + $4.09 + $4.44 +  243.57 = $259.34

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Inbound logistics means managing the materials and parts between the manufacturer and the supplier with the help of transportation and deals with the procurement and storage of the materials and parts.

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When deciding the cost of an insurance policy being applied to the customer, then the underwriting experts used the concept of data analytics.

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