What is its current stock price? What is the stock\'s expected value 1 year from

Question

What is its current stock price? What is the stock's expected value 1 year from now? What are the expected dividend yield, capital gains yield, and total return during the first year? Now assume that the stock is currently selling at $30.29. What is its expected rate of return? What would the stock price be if its dividends were expected to have zero growth? Now assume that Bon Temps is expected to experience nonconstant growth of P tor the next 3 years, then return to its long-run constant growth rate of 6%. What is the stock's value under these, conditions? What are its expected dividend and capital gains yields in Year 1? Year 4? Suppose Bon Temps is expected to experience zero growth during the first 3 years and then resume its steady-state growth of 6% in the fourth year. What would be its value then? What would be its expected dividend and capital gains yields in Year 1? In Year 4? Finally, assume that Bon Temps's earnings and dividends are expected to decline at a constant rate of 6% per year, that is, g = -6%. Why would anyone be willing to buy such a stock, and price should it sell? What would be its dividend and capital gains yields in each year? Suppose Bon Temps embarked on an aggressive expansion that requires additional capital.

Explanation / Answer

c- required rate of retufn IRF+(RM-IRF)*beta 13 13% d- 1 expected dividend stream over three years growth rate 6% 0 2 1 2.12 2 2.2472 3 2.382032 b current stock price expected dividend/ke-g 30.28571 C- share price one year from now expected dividend/ke-g 32.10286 d dividend yield 0.06 capital gain yield 0.06 total return 0.12 12 percent e if stock of selling at 30.29 there is no gain as market value and book value of stock is equal and it is correctly price dividend yield 0.06 capital gain yield 0 total return 0.06 0.06 f if dividend growth rate is zero 15.3846154 percent g expected dividend stream over three years share price 0 2 15.38462 1 2.6 -15.2941 2 3.38 -19.8824 3 4.394 -25.8471 4 4.65764 66.53771 share price at year 1 -15.2941176 share price at year 4 66.5377143 dividend yield in year 1 0.3 30 capital gain yield -1.99411765 -199.412 dividend yield in year 4 0.06 capital gain yield -3.57428571 -357.429 h expected dividend stream over three years share price 0 2 15.38462 1 2 15.38462 2 2 15.38462 3 2 15.38462 4 2.12 16.30769 dividend yield in year 1 0 0 capital gain yield 0 0 dividend yield in year 4 0.06 capital gain yield 0.06 6 percent i expected dividend stream over three years share price 0 2 15.38462 1 1.88 14.46154 2 1.7672 13.59385 3 1.661168 12.77822 4 1.56149792 12.01152 dividend yield in year 1 -0.06 -6 capital gain yield -0.06 -6 dividend yield in year 4 -0.06 capital gain yield -0.06 -6 no one would be interested to buy this stock as it is offering negative growth rate

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