Renata Inc. is presently enjoying relatively high growth because of a surge in the demand for...

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Renata Inc. is presently enjoying relatively high growthbecause of a surge in the demand for its new product. Managementexpects earnings and dividends to grow at a rate of 22% for thenext 4 years, after which competition will probably reduce thegrowth rate in earnings and dividends to zero, i.e., g = 0. Thecompany’s last dividend, D₀, was$1.25, its beta is 1.20, the market risk premium is 5.50%, and therisk-free rate is 3.00%. What is the current price of the commonstock?
The Best Company's last dividend was $1.75. Its dividendgrowth rate is expected to be constant at 24% for 2 years, afterwhich dividends are expected to grow at a rate of 6% forever. Itsrequired return (r_s) is 12%. What isthe best estimate of the current stock price?.
posted previously 1 but never went through please show work forboth

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4.1 Ratings (739 Votes)

1 As per CAPM expected return riskfree rate beta Market risk premium Expected return 3 12 55 Expected return 96 Required rate 960 Year Previous year dividend Dividend growth rate Dividend current year Horizon value Total Value Discount factor Discounted value 1 125 2200 1525 1525 1096 See Answer

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Renata Inc. is presently enjoying relatively high growthbecause of a surge in the demand for its new product. Managementexpects earnings and dividends to grow at a rate of 22% for thenext 4 years, after which competition will probably reduce thegrowth rate in earnings and dividends to zero, i.e., g = 0. Thecompany’s last dividend, D0, was$1.25, its beta is 1.20, the market risk premium is 5.50%, and therisk-free rate is 3.00%. What is the current price of the commonstock?The Best Company's last dividend was $1.75. Its dividendgrowth rate is expected to be constant at 24% for 2 years, afterwhich dividends are expected to grow at a rate of 6% forever. Itsrequired return (rs) is 12%. What isthe best estimate of the current stock price?.posted previously 1 but never went through please show work forboth