Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.05 next

Question

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.05 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company’s stock is 9 percent, 12 percent, and 15 percent, respectively. What is the stock price for each company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.05 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company’s stock is 9 percent, 12 percent, and 15 percent, respectively. What is the stock price for each company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Stock price = Next expected dividend÷(Required return-Growth rate)

Red inc. = $3.05÷(9%-6%) = $101.67

Yellow corp. = $3.05÷(12%-6%) = $50.83

Blue company = $3.05÷(15%-6%) = $33.89

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.