Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Burnham & Company's $75 par value
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- pleaseeee helppparrow_forwardA preferred stock is expected to pay a constant quarterly dividend of $1.75 per quarter into the future. The required rate of return, Rs, on the preferred stock is 12.0 percent. What is the fair value (or price) of this stock? Group of answer choices a. $18.65 b. None of the above c. $37.04 d. $24.36 e. $58.33arrow_forwardA stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?arrow_forward
- The risk-free rate of return (r) is 2% and the expected market rate of return (rm) is 10%. The shares A, B and C all pay a dividend (D) of $6 a year. The betas for the shares are: A = 0.2; f = 1.0; and ?c = 1.8. The shares are all trading at the same price (P) of $60.Requirements. Answer the following questions:Q1. What are the expected returns on A, B and C?Q2. What are the expected prices of A, B and C?Q3. What action would you recommend for A?Q4. What action would you recommend for B?Q5. What action would you recommend for C?arrow_forwardAchi Corp. has preferred stock with an annual dividend of $2.89. If the required return on Achi's preferred stock is 8.1%, what is its price? (Hint: For a preferred stock, the dividend growth rate is zero.) Achi's stock price will be $_______.arrow_forwardA stock is expected to pay a dividend of $1.99 at the end of the year. The required rate of return is rs = 13.82%, and the expected constant growth rate is g = 8.0%. What is the stock's current price?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. $39.61 B. $29.71 C. $34.14 D. $42.68 E. $35.51arrow_forward
- The preferred stock of PAY Inc. pays an annual dividend of $3.75 and sells for $47.80 a share. What is the rate of return on this security?arrow_forwardCarter's preferred stock pays a dividend of $1.15 per quarter. If the price of the stock is $62.50, what is its nominal (not effective) annual rate of return? a. 1.84% b. 3.68% c. 7.57% d. 3.71% e. 7.36%arrow_forwardSmathers Corporation stock has a beta of 1.12. The market risk premium is 7.90 percent and the risk-free rate is 3.27 percent annually. What is the company's cost of equity? 7.99% 8.22% 10.29% 12.12% 8.46% B) Rossdale Company stock currently sells for $70.67 per share and has a beta of 1.12. The market risk premium is 7.90 percent and the risk-free rate is 3.27 percent annually. The company just paid a dividend of $3.89 per share, which it has pledged to increase at an annual rate of 3.65 percent indefinitely. What is your best estimate of the company's cost of equity? 8.46% 9.60% 10.74% 11.56% 10.01% C) Bethesda Water has an issue of preferred stock outstanding with a coupon rate of 4.50 percent that sells for $91.82 per share. If the par value is $100, what is the cost of the company's preferred stock? Multiple Choice 5.31% 4.90% 4.50% 4.60% 4.70%arrow_forward
- The share price of a company is shs100. Its expected next dividend is shs3. The dividend and share price growth rate is expected to be 4% p.a. The risk-free interest rate is 5% p.a. The share has a beta of 0.8 and the expected yield on the stock market as a whole is 8% p.a. Use the Gordon Growth Model and the Security Market Line to form an opinion as to whether the share is correctly priced.arrow_forwardAchi Corp. has preferred stock with an annual dividend of $2.83. If the required return on Achi's preferred stock is 7.5%, what is its price? (Hint: For preferred stock, the dividend growth rate is zero.) Achi's stock price will be $______ (Round to the nearest cent.)arrow_forwardsuppose south florida energy has preferred stock outstanding that pays an annual dividend of $5.95. If investors' required return is 6.8%, what is the present value of the preferred stock? the common stock is trading for $87.50 per share. 177.75 84.11 96.20 87.50 84.24arrow_forward
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