Computing fair price for stock


1) Analysts of ICM Corporation have pointed out that company is expected to grow at 5% rate for as long as it is in business. Presently ICM's stock is selling for= $70 per share. Most current dividend paid by company was= $5.60 per share. If ICM issues new common stock, it will acquire flotation costs equal to 7%. ICM's marginal tax rate is= 35%. Determine its cost of retained earnings- that is, its retained earnings (internal equity)? Detemrines ICM's cost of new equity?

2)You have predict that United Sports, Inc. will pay the dividend of= $.30 next year (in time 1), $.60 two years from now (in time 2) and $1.00 3 years from now (in time 3). For dividends beyond 3 years, you suppose they will rise at 6% per year from previous year. If discount rate is= 9%, compute a fair price for stock of United Sports, Inc.

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Finance Basics: Computing fair price for stock
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