Pfizer paid its stockholders a dividend of $5 per share yesterday. Today, the company announced that...

60.1K

Verified Solution

Question

Finance

Pfizer paid its stockholders a dividend of $5 per shareyesterday. Today, the company announced that they plan to increasethat dividend by $1.00 per share for each of the next three years.After that, they plan to keep their dividend at $8 per shareforever. The variance of Pfizer’s stock is .09, the variance of themarket is .04, and the correlation between Pfizer’s stock and themarket is .05. The risk-free rate is 3% and the market-risk premiumis 5.7%. Pfizer has $100 million shares of stock outstanding and$50 million of debt. The YTM for its is 8%. Use the dividenddiscount model to find the price per share of Pfizer’s stock.

Answer & Explanation Solved by verified expert

3.6 Ratings (559 Votes)

First we need to calculate beta of the Pfizers stock using below formula Beta of a stock correlation between stock and marketstocks standard deviationmarkets standard deviation Standard deviation of stock Variance12 00912 03 Standard deviation of market 00412 02 Beta 0050302 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member