Gordon model evaluating value of share of stocks


1) Prezas Company's balance sheet illustrated total present assets of= $2,750, all of which were needed in operations. Its present liabilities consisted of= $975 of accounts payable, $600 of 6% short-term notes payable to bank, and $250 of accumulated wages and taxes. Determine its net working capital.

Situations in which constant growth valuation model and gordon model for evaluating value of share of stocks must be used include:

a) Declining dividends

b) An erratic dividend stream

c) The lack of dividends

d) A steady growth rate in dividends

2) Thirsty Cactus Corp. just paid the dividend of= $2.10 per share. Dividends are expected to increase at 24% for next 8 years and then level off to growth rate of 6% indefinitely. If needed return is 13%, determine the price of stock today?

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Finance Basics: Gordon model evaluating value of share of stocks
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