(Common stock valuation) Assume the following: • the investor's required rate of return is 16 percent, • the expected level of earnings at the end of this year (E,) is $9, • the retention ratio is 60 percent, • the return on equity (ROE) is 19 percent (that is, it can earn 19 percent on reinvested earnings), and • similar shares of stock sell at multiples of 8.696 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE,). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? a. What is the expected growth rate for dividends? % (Round to two decimal places.) b. What is the price earnings ratio (PIE,)? (Round to three decimal places.) c. What is the stock price using the P/E ratio valuation method? (Round to the nearest cent.) d. What is the stock price using the dividend discount model? $ (Round to the nearest cent.) Enter your answer in each of the answer boxes. Save for Later

(Common stock valuation) Assume the following: • the investor's required rate of return is 16 percent, • the expected level of earnings at the end of this year (E,) is $9, • the retention ratio is 60 percent, • the return on equity (ROE) is 19 percent (that is, it can earn 19 percent on reinvested earnings), and • similar shares of stock sell at multiples of 8.696 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE,). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? a. What is the expected growth rate for dividends? % (Round to two decimal places.) b. What is the price earnings ratio (PIE,)? (Round to three decimal places.) c. What is the stock price using the P/E ratio valuation method? (Round to the nearest cent.) d. What is the stock price using the dividend discount model? $ (Round to the nearest cent.) Enter your answer in each of the answer boxes. Save for Later

Name: 21ChapterTis Quiz:ptsom(Common stock valuation) Assume the following:
Uploaded: 2024-03-20T06:51:32.000Z
Channel: Bartleby
Description: 21ChapterTis Quiz:ptsom(Common stock valuation) Assume the following:21I Chapter• the investor's required rate of returm is 16 percent,• the expected level of earnings at the end of this year (E,) is $9,• the retention ratio is 60 percent,• the retu

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 11P

See similar textbooks

Similar questions

Question content area top Part 1 (Common stock valuation) Assume the following: • the investor's required rate of return is 14.5 percent, • the expected level of earnings at the end of this year (E1) is $6, • the retention ratio is 40 percent, • the return on equity (ROE) is 14 percent (that is, it can earn 14 percent on reinvested earnings), and • similar shares of stock sell at multiples of 6.742 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (P/E1). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (P/E1) and stock price if the company increased its retention rate to 80 percent (holding all else constant)? What would happen to the P/E ratio (P/E1) and stock price if the company paid out all its earnings in the form of dividends?…
(Common stock valuation) Assume the following: Chapter • the investor's required rate of return is 16 percent, • the expected level of earnings at the end of this year (E,) is $9, • the retention ratio is 60 percent, • the return on equity (ROE) is 19 percent (that is, it can earn 19 percent on reinvested earnings), and • similar shares of stock sell at multiples of 8.696 times earnings per share. Chapter Chapter Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE, ). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? Chapter a. What is the expected growth rate for dividends? Chapter 1 % (Round to two decimal places.) Thapter 1 b. What is the price earnings ratio (PIE,)? (Round to three decimal places.) hapter c. What is the stock price using the P/E ratio valuation method? (Round to the nearest cent.) d. What is the stock price using the dividend discount…
ADC 1) Based on End-of-Chapter Problem 6 in Chapter 5 The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end- of-year price depend on the state of the economy by the end of the year as follows: Stock Price Dividend. $2.00 $50 1.00 43 0.50 34 a. Calculate the expected holding-period return and standard deviation of the holding- period return. All three scenarios are equally likely. Boom Normal economy Recession b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%.
1. An analyst estimates that a stock will pay a $1 dividend next year and that it will sell for $40 at year-end. If the required rate of return is 14%, what is the value of the stock? A. $34.60. B. $35.52. C. $35.96. Please provide an accurte answer.
Assume a stock paid a dividend of $1 per share over the last year, the required rate of return on the stock is 5%, and the dividends are expected to grow at a constant rate of 11% into the future. What is the intrisic value of this stock? A. $16.67 B. $17.50 C. $9.55 D. Cannot determine without additional information
1. An analyst estimates that a stock will pay a $1 dividend next year and that it will sell for $40 at year-end. If the required rate of return is 14%, what is the value of the stock? A. $34.60. B. $35.52. C. $35.96.
Question 03 Current forecasts are for XYZ Company to pay dividends of OMR 2.000, OMR 2.350, OMR 2.600and OMR 2.850 over the next four years, respectively. At the end of four years you anticipate selling your stock at a market price of OMR 108.58. Required: What is the price of the stock given a 12% expected return?
(Common stock valuation) Assume the following: • the investor's required rate of return is 15 percent, • the expected level of earnings at the end of this year (E, ) is $7, • the retention ratio is 40 percent, • the return on equity (ROE) is 19 percent (that is, it can earn 19 percent on reinvested earnings), and • similar shares of stock sell at multiples of 8.109 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE,). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? a. What is the expected growth rate for dividends? % (Round to two decimal places.)
(Common stock valuation) ASsume the following: • the investor's required rate of return is 14 percent, • the expected level of earnings at the end of this year (E,) is $14, • the retention ratio is 30 percent, • the return on equity (ROE) is 16 percent (that is, it can earn 16 percent on reinvested earnings), and • similar shares of stock sell at multiples of 7.609 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (PIE1). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (PIE,) and stock price if the company increased its retention rate to 70 percent (holding all else constant)? What would happen to the P/E ratio (PIE,) and stock price if the company paid out all its earnings in the form of dividends? f. What have you learned about the relationship between the retention rate and the P/E ratios?
1. A share of stock of company is now selling for 23.5 lei. A financial analyst summarizes the uncertainty about the rate of return on the stock by specifying three possible scenarios: Scenario Probability 0.35 End-of-year price 35 27 Annual dividend 4.4 II 0.3 4 15 Compute the expected return and risk on this security. III 0.35 4
# 30 An investor has examined Target stock and makes the following predictions for the future: YEAR DIVIDEND 1 $1.12 2 3 $1.25 $1.59 4 Submit $1.88 The investor believes the selling price in four years will be $85.41. The price of Target stock this morning is $71.68. What return will the investor earn if he is correct about future dividends and selling price? Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))
Stock Expected Return A 15% B 10% C 22% D 14% Use the information in the schedule above to answer the following: (a). What is the expected return on a portfolio consisting of an equal amount invested in each stock (5 points)