GMA corporation is preparing to issue common stock. The Chief Financial Officer is attempting to estimate GMR’s cost of new common stock. The next dividend is expected to be P4.25 and will be paid one year from now. The current market price reflects an 18% expected annual return on investors. Dividends are expected to grow at a constant 8% per year. Flotation costs on the new issue will be P 1.25 per share. GMR’s cost of new common stock is nearest: a. 18.30% b. 18.00% c. 19.25% d. 19.44%
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GMA corporation is preparing to issue common stock. The Chief Financial Officer is attempting to estimate GMR’s cost of new common stock. The next dividend is expected to be P4.25 and will be paid one year from now. The current market price reflects an 18% expected annual return on investors. Dividends are expected to grow at a constant 8% per year. Flotation costs on the new issue will be P 1.25 per share. GMR’s cost of new common stock is nearest:
a. 18.30%
b. 18.00%
c. 19.25%
d. 19.44%
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- Maxwell Inc. announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $0.93 a share. The dividends will be $1.03 and $1.60 a share annually for the next two years, respectively. After that, dividends are projected to increase by 4.0 percent per year. How much are you willing to pay today to buy one share of this stock if your desired rate of return is 12 percent? $17.33 $20.51 $22.08 $24.00The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…General Importers announced that it will pay a dividend of $2.00 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 6 years. Then, 8 years from today, the company will begin paying an annual dividend of $1.00 forever. The required return is 10.00 percent. What is the price of the stock today?
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