Hi Tutor,
Having trouble figure out these question, can you help to solve and show details on the following questions,
thank you,
- Company Y is expected to produce a level dividend stream of $5 a share. If the market capitalization is 10 percent, what is the current stock price of Company Y? (Note: The market capitalization is the market consensus estimate of the appropriate discount rate for a firm’s cash flow.)
- Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the market capitalization rate is 8%, what is the current stock price?
- Company Z-prime is like Z in all respects except one: Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings (estimated as $18.00) as dividends. What is Z-prime’s stock price?
