Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- A stock just paid a dividend of $1.05. The dividend is expected to grow at 27.09% for three years and then grow at 4.20% thereafter. The required return on the stock is 10.14%. What is the value of the stock?arrow_forwardYou wish to earn a return of 11% on each of two stocks, A and B. Stock A is expected to pay a dividend of $3 in the upcoming year while stock B is expected to pay a dividend of $2 in the upcoming year. The expected growth rates of dividends for stocks A and B are 4% and 3%, respectively. Using the constant growth DDM, the intrinsic value of stock A Will be less than the intrinsic value of stock B O Will be higher than the intrinsic value of stock B O More information is necessary to Answer this question O Will be the same as the intrinsic value of stock Barrow_forwardYou are considering purchasing a share of preferred stock with the following characteristics: par value = $100 dividend rate = 12% per year payment schedule = quarterly maturity date = required rate of return = 6% per year current market price = $135 per share Based on this information, answer the following: A. What is the dollar amount of the quarterly dividend on this stock? B. Using the Discounted Cash Flow Method, what is the dollar value of this stock? C. Using the Discounted Cash Flow Method, what is the annual expected return for this stock? D. Based on your answer to part B, should you invest in the stock? Why or why not? E.…arrow_forward
- A stock has a price (i.e., present value of all cash flows from the stock expected by investors) of $33.00 today. It is expected to pay a dividend of $1.10 per share next year, $1.20 per share in the following year, $1.90 in the subsequent U years (i.e., pay a dividend of $1.90 in years 3 through year U+2 into the future), and then be sold for $36.00 in U+2 years (where that $34 represents the present value of all dividends expected after U+2 years). Compute the interest rate or expected return on this stock (i.e., iterate to find the r that sets the sum of the present value of the future expected cash flows equal to the $33 present value). U=44arrow_forwardYou are analyzing a stock that is currently selling for $18.92. Yesterday, this firm announced EPS of $1.88. You feel it is reasonable to assume that earnings will grow at about 1.85% into the future. Based on this assumption, what is the yield on this stock at its current price? 10.22% 11.79% 11.97% 9.44%arrow_forwardA share of common stock just paid a dividend of $ 1.47 . If the expected long-run growth rate for this stock is 5.1 %, and if investors' required rate of return is 13.52 %, what is the stock price?arrow_forward
- What is the required return on preferred stock, rPS, if the stock has an annual dividend of $9 and a price of $100?arrow_forwardA stock has just paid the last dividend at $2.5 per share. Its dividends are anticipated to grow at a constant rate of 6%. Given the stock return is 11%, what is the stock's dividend yield and the capital gains yield for the irst year? Oa, Dividend yield-6.0%; capital gains yield-6.0% Ob. Dividend yield-5.0%; capital gains yield-6.0% Oc Dividend yield=11.0%; capital gains yield-6.0% Od. Dividend yield=5.0%; capital gains yield-5.0%arrow_forwardA stock just paid a dividend of $3.2 and the dividend is expected to grow at a constant rate of 4.3% forever. If the required return is 9.1%, what is the value of the stock? Answer:arrow_forward
- ABC common stock is expected to pay a dividend of $3 a share at the end of the year; the required rate of return is 10%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $100 a share. Assuming the market is in equilibrium, the stock's price at the end of year 5 will be $_______. $60.83 $140.26 $54.12 $115.43arrow_forwardA stock just paid a dividend of $2.34. The dividend is expected to grow at 21.23% for five years and then grow at 4.20% thereafter. The required return on the stock is 12.23%. What is the value of the stock?arrow_forward
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