1. What would be the current desired stock price of a share of Bowden Corporation stock that pays a P2 dividend and will be worth P110 in 1 year? A 12% return on equity is required. P110 P98.21 P112 P100

1. What would be the current desired stock price of a share of Bowden Corporation stock that pays a P2 dividend and will be worth P110 in 1 year? A 12% return on equity is required. P110 P98.21 P112 P100

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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Question

1. What would be the current desired stock price of a share of Bowden Corporation stock that pays a P2 dividend and will be worth P110 in 1 year? A 12% return on equity is required.

P110

P98.21

P112

P100

2. A stock has an expected return of 12.25 percent. The beta of the stock is 1.15 and the risk-free rate is 5 percent. What is the market risk premium?

7.25%

6.50%

6.30%

1.30%

15.00%

3. The dividends and stock price of Mimi Company are expected to grow at 5 percent per year at very far future year. Mimi’s common stock sells for P25 per share, its last dividend was P2.50, Mimi should pay P2.50 flotation cost. What is the expected return on retained earnings for Mimi Company?

15.5 percent

16.11 percent

15.00 percent

16.67 percent

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