Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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A firm just paid a dividend of D0 = ₱1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?
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- A common stock is expected that the earnings and dividends will grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company’s last dividend, D0, was ₱1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?arrow_forwardProblem 1: Nachman Industries just paid a dividend of Do = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock's current market value?arrow_forwardA firm recently paid a dividend of $2.05 per share, but analysts expect the dividend to decrease by 6% per year. The risk free rate is 1.5% and the market risk premium is 7%. If its beta is 2.25 and the market is in equilibrium what is the value of the stock? (explain your answer) $19.32 $8.82 $11.17 $8.29arrow_forward
- Suppose that a firm with a stock price of $80 just announced that it expects to pay a $100 per share liquidating dividend in 1 year, although the exact amount of the dividend depends on the performance of the company this year. Assume that the CAPM is a good description of stock price returns and that the stock’s beta is 1.5, the market’s expected return is 12%, and the risk-free rate is 5%. 1) Is the stock priced correctly now? 2) What is the alpha of the stock? 3) What would you expect to happen to the stock price in an efficient market after the announcement? Give typing answer with explanation and conclusionarrow_forwardA common stock just paid a dividend of D0 = ₱1.50. The required rate of return is10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?arrow_forwardA stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 9%. What is the stock's current price? Select the correct answer. a. $46.00 b. $48.00 c. $47.00 d. $50.00 e. $49.00arrow_forward
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