As an investor with a marginal federal tax rate of 29% and a provincial tax rate of 11.16%, you have decided to purchase 2,000 shares of ABC CORP. and hold them for 1 year. The current market price of a share of ABC is $ 40.00. An investment analyst has indicated that the shares are expected to rise in price by 10% in 1 year's time and that ABC is expected to declare and pay a dividend of $ 1.00 per share for the coming year. Required: If you purchase the shares, what will be your expected total after-tax rate of return from the investment and selling the shares after 1 year?
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- David Davis is interested in purchasing the common stock of Pharoah, Inc., which is currently priced at $40.69. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 7.50 percent.Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned$3.41 per share and paid cash dividends of$1.71per share(D0equals$ 1.71). Grips' earnings and dividends are expected to grow at20%per year for the next 3 years, after which they are expected to grow 5%per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 14% on investments with risk characteristics similar to those of Grips?You are considering the purchase of XYZ Company's common stock which will pay a $ 1.00 per share dividend one year from the date of purchase. The dividend is expected to grow at the rate of 4% per year. If the appropriate discount rate for this investment is 14%, what is the price of one share of this stock? A) $7.14 B) $10.00 C) $25.00 D) Cannot be determined without
- Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $2.50 per share and paid cash dividends of $0.80 per share (D0equals $ 0.80). Grips' earnings and dividends are expected to grow at 15%per year for the next 3 years, after which they are expected to grow 4% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 8% on investments with risk characteristics similar to those of Grips? Can you please show me how to solve this and solve it in ExcelTo purchase shares of Paylocity Inc. (ticker symbol: PCTY), Steven Beauchamp requires a return of 8.50%. Paylocity, which just paid an annual dividend of $1.50 per share, expects to grow its annual dividend by 22% per year for the next 4 years. A 5% constant growth rate is subsequently expected. How much will Mr. Beauchamp pay today for one share of Paylocity? a. $62.36 b. $80.05 c. $67.26 d. $78.22 e. $71.25Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.95 per share and paid cash dividends of $2.25 per share (D0equals=$ 2.25). Grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to grow 6% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 11% on investments with risk characteristics similar to those of Grips?
- Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.53 per share and paid cash dividends of $1.83 per share (D Subscript 0=$1.83). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 9%per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 11% on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips isMetroplex Corporation will pay a $3.04 per share dividendnext year. The company pledges to increase its dividend by 3.8 percent per yearindefi nitely. If you require an 11 percent return on your investment, how much willyou pay for the company’s stock today?You are told by yourinvestment advisor that Laduma Co. is expected to earn R5 per share next year, R6 per share the following year and that thereafter earnings are expected to grow by 8 percent per year. The dividend payout ratio is 60 percent and the required rate of return on Laduma shares is 15 percent. If the current share price is R40, would you expect your adviser to make a buy, hold or sell recommendation? Iftransaction costs are R2,50 per share, would you follow his advice?
- En. Ibrahim is considering to purchase 1,000 common shares from Company ABC. Dividends from the shares are payable at the end of half-yearly. The next dividend is due in exactly six months and is expected to be RM0.55 per share. The required nominal rate of return is 10% convertible semi-annually and an estimated nominal rate of future dividend growth is 2% convertible semi- annually. (i) Calculate, showing all working, the price that En. Ibrahim should pay for the shares. As a result of a recently announced expansion plan by company ABC, En. Ibrahim increases the estimated rate of future dividend growth to a nominal rate of 3% convertible semi-annually. (ii) Calculate the maximum price that En. Ibrahim should now pay for the shares. (iii) Explain the difference between your answers to part (i) and part (ii).Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.65 per share and paid cash dividends of $1.95 per share (D0=$1.95). Grips' earnings and dividends are expected to grow at 35% per year for the next 3years, after which they are expected to grow 9% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 13% on investments with risk characteristics similar to those of Grips?Suppose Acap Corporation will pay a dividend of $2.81 per share at the end of this year and $2.97 per share next year. You expect Acap's stock price to be $51.74 in two years. Assume that Acap's equity cost of capital is 10.9%. a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years? b. Suppose instead you plan to hold the stock for one year. For what price would you expect to be able to sell a share of Acap stock in one year? c. Given your answer in (b), what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for one year? How does this compare to your answer in (a)?