You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter14: Distributions To Shareholders:dividends And Share Repurchases
Section: Chapter Questions
Problem 3TCL
icon
Related questions
Question
You've collected the following information from your favorite financial website
52-Week Price
Hi
Lo
Stock (Dividend)
Dividend
Yield %
PE Ratio Close Price Net Change
77.40
10.43
Acevedo .36
2.6
6
13.90
-.24
55.81
33.42
Georgette, Incorporated 1.54
3.8
10
40.43
-.01
131.03
70.00
YBM 2.50
2.8
10
89.07
3.07
50.24
35.00
13.95
Manta Energy .80
5.2
6
15.43
-.26
20.74
Winter Sports .32
1.5
28
18
According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM
meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume
investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Current stock price
Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued?
Stock currently
Transcribed Image Text:You've collected the following information from your favorite financial website 52-Week Price Hi Lo Stock (Dividend) Dividend Yield % PE Ratio Close Price Net Change 77.40 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.03 70.00 YBM 2.50 2.8 10 89.07 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 15.43 -.26 20.74 Winter Sports .32 1.5 28 18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 20.5 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.5 percent, indefinitely. Assume investors require a return of 15 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current stock price Based on these assumptions, is the stock currently overvalued, undervalued, or correctly valued? Stock currently
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Fundamentals Of Financial Management, Concise Edi…
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning