Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- 13. Use the following information on Stock X to find the price of a share of stock using the free-cash flow. Assume the annual growth is 4.0% and the WACC is 7.0%. The financial statements below are on Moodle for Exam 2 in case you want to use those to practice-prepare for this question. Answer: Financial Statements at the end of Year Income Statement Sales COGS Gross Profits Depreciation EBIT Interest End of Year 1 $ 68,000.00 $ 45,800.00 $ 22,200.00 $ 1,000.00 $ 21,200.00 $ 97.50 $ 21,102.50 $ 6,330.75 $ 14,771.75 $ Change in Retained Earnings $ 14,771.75 Income Before Taxes Taxes (30%) Net Income Dividends AAAA Balance Sheet Assets Begin. of Year 1 End of Year 1 Llabilities Begin. of Year 1 End of Year 1 Cash $ Inventories $ Net fixed assets $ 5,000.00 $ 6,000.00 $ 28,000.00 $ 10,571.75 4,200.00 39,000.00 Total Assets $ 39,000.00 $ 53,771.75 Notes payable Long term debt Initial paid in capital $ Retained earnings $ Tot. Llab. & Equity $ 1,950.00 $ 37,050.00 $ $ $ 39,000.00 $…arrow_forwardA stock just paid a dividend of $1.51. The dividend is expected to grow at 21.84% for two years and then grow at 3.90% thereafter. The required return on the stock is 11.25%. What is the value of the stock?arrow_forwardUsing the data in the table to the right, calculate the return for investing in the stock from January 1 to December 31. Prices are after the dividend has been paid. Return for the entire period is%. (Rourd to two decimal places.) Date Jan 1 Feb 5 May 14 Aug 13 Nov 12 Dec 31 Price $34.01 $29.79 $28.38 $33.82 $37.51 $41.91 Dividend $0.21 $0.21 $0.18 $0.21arrow_forward
- What is the price of a stock with an annual dividend of $30, required return on equity of 10%, and expected dividend growth rate of 7%? Select one: a. $1070 b. $960 , O c. $1015 d. $1135arrow_forwardA company's preferred stock pays an annual dividend of $4.00 per share. The stock is currently priced at $80.00. What is the current dividend yield? O 8.0% O 4.0% O 10.0% O 5.0% 12.0%arrow_forwardYou are considering the purchase of preferred shares issued by Somerset Corp. These pay an annual dividend of $3.15 and are currently selling for $26.90. What is the implied return on this investment? 11.71% 8.54% 10.92% 12.16%arrow_forward
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- You buy a share on 1 January for $35.13 and sell it on 31 December for $39.68. During the year the share pays dividends of $1.16 on 1 April, $2.42 on 1 July and $2.17 on 1 October. What is your realised return? a. 3.0242% b. 29.3197% c. 3.4159% d. 25.9577%arrow_forwardSpringtime Inc. has a perpetual preferred stock that pays a $9 per year dividend. The required rate of return on the preferred stock is 9%. What is the intrinsic value of a share of the preferred stock? a. $100 b. $90 c. $120 d. $85arrow_forwardWhat is the value of a stock with the following dividends, an 8.5% discount rate, and a growth rate of 6% (beginning in year 6)? (Round to the nearest dollar) Year Dividends $120 $99 $110 $80 $85 1 $2.16 2 $2.38 3 $2.61 4 $2.87 5 $3.16arrow_forward
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