Ask Question
BusinessBusiness
3 March, 03:18

Financial analysts forecast Safeco Corp.'s (SAF) growth rate for the future to be 8 percent. Safeco's recent dividend was $1.85. What is the value of Safeco stock when the required return is 10 percent?

+5
Answers (1)
  1. 3 March, 04:52
    0
    The price of the stock today is $99.9

    Explanation:

    The growth rate of 8% is assumed to remain constant throughout the future. In this case, the constant growth model of the DDm will apply. The formula for price of the stock today using the constant growth model is,

    Price = D0 * (1+g) / (r - g)

    Where,

    D0 * (1+g) gives the dividend for the next period D1 r is the required rate of return g is the growth rate

    Price = 1.85 * (1+0.08) / (0.1 - 0.08)

    Price = $99.9
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Financial analysts forecast Safeco Corp.'s (SAF) growth rate for the future to be 8 percent. Safeco's recent dividend was $1.85. What is ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Ramona owns a small coffee shop, where she works full-time. Her total revenue last year was $100,000, and her rent was $3,000 per month. She pays her one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month.
Answers (1)
As of December 31, Marr, Inc., has accrued benefits to its employees for medical insurance (in the amount of $12,000) and a contribution to a retirement program (at 10% of the employees' $200,000 gross salary).
Answers (1)
Kenneth finds a home in town that has been abandoned and moves into it. he fixes broken windows, paints the house, tends the yard and garden, and puts his name on the mailbox by the street.
Answers (1)
Liam Company signed a lease for an offi ce building for a period of 12 years. Under the lease agreement, a security deposit of $9,600 is made. The deposit will be returned at the expiration of the lease with interest compounded at 4% per year.
Answers (1)
Anson Apparel's marketing message in the United States is one of apparel for the rugged man who spends most of his time outdoors.
Answers (1)
New Questions in Business
Smaller companies are moreLikely than larger companies to divide up tasks using a strategy
Answers (2)
Which type of law governs the relationship between private individuals or companies? A. criminal law B. civil law C. statutory law D. common law
Answers (1)
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. if the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:
Answers (1)
The general manager of a yacht club is conducting a SWOT analysis. One of the items he has listed is that all of his department managers have either just completed or are in the process of completing the Manager in Development program from the Club
Answers (1)
Your brother has asked you for a loan and has promised to pay you $9,800 at the end of three years. If you normally invest to earn 6.
Answers (1)
Home » Business » Financial analysts forecast Safeco Corp.'s (SAF) growth rate for the future to be 8 percent. Safeco's recent dividend was $1.85. What is the value of Safeco stock when the required return is 10 percent?
Sign Up Forgot Password?