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Author Question: Plimpton Inc. just paid a dividend of 1.33. Its stock has a dividend growth rate of 7.6 and a ... (Read 109 times)

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on: Jul 10, 2018
Plimpton Inc. just paid a dividend of 1.33. Its stock has a dividend growth rate of 7.6 and a required return of 12.21. What is the current stock price if we anticipate dividends stopping in 10 years?
 
  A) 31.04
  B) 21.03
  C) 11.92
  D) 10.64

Question 2

Korver Inc. just paid a dividend of 0.73. Its stock has a dividend growth rate of 5.62 and a required return of 10.21. What is the current stock price if we anticipate dividends stopping in 20 years?
 
  A) 8.62
  B) 9.62
  C) 10.62
  D) 11.62


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chjcharjto14

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: D
Explanation: D) The price is given by multiplying two components (see Equation 7.8 in the text).
The first component is = = = 31.043.
The second component is 1 - = 1 - = 1 - 0.95891610 = 0.342634.
Thus, price = 31.043  0.342634 = 10.6364, or about 10.64.

Answer to Question 2

Answer: B
Explanation: B) The price is given by multiplying two components (see Equation 7.8 in the text).
The first component is = = = 16.798.
The second component is 1 - = 1 - = 1 - 0.95835220 = 0.572926.
Thus, price = 16.798  0.572926 = 9.624 or about 9.62.


stock

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

LVPMS

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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