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17 March, 07:04

Financial analysts forecast Safeco Corporation (SAF) growth for the future to be a constant 8 percent. Safeco's recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?

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Answers (2)
  1. 17 March, 08:50
    0
    23.76

    Explanation:

    Constant growth model

    P° = D° (1+g) / 1-g

    = 0.88 (1+0.08) / 0.12-0.08

    =0.88*1.08/0.04

    =0.9504/0.04

    =23.76

    Therefore the value of Safeco stock when the required return is 12 percent is 23.76
  2. 17 March, 10:07
    0
    23.76

    Explanation:

    Steps Taken

    The growth for the future for Safeco Corporation = 8%

    Sefaco's recent dividend is=$0.88

    Now, the value of Sefeco stock when the required return is 12% is given below

    The Constant Model Growth is,

    Po = Do (1 + g) / i-g

    0.88 (1+0.08) / 0.12 - 0.8 = 23.76
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Home » Business » Financial analysts forecast Safeco Corporation (SAF) growth for the future to be a constant 8 percent. Safeco's recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?
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