FLAG QUESTION ... Scooter Madness (SM) has 10,000 shares outstanding and is expected to have Net Income of $70,000 in year 1. SM expects to retain 35% of its earnings to invest in projects at the end of year 1. If the expected share price 1 year from toda after any dividend issued is $65 and SM's return on equity capital is 16%, what would you expect the share price to be today? (round to the nearest cent: $x.xx) Answers 1-1

FLAG QUESTION ... Scooter Madness (SM) has 10,000 shares outstanding and is expected to have Net Income of $70,000 in year 1. SM expects to retain 35% of its earnings to invest in projects at the end of year 1. If the expected share price 1 year from toda after any dividend issued is $65 and SM's return on equity capital is 16%, what would you expect the share price to be today? (round to the nearest cent: $x.xx) Answers 1-1

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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9) Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $22.00, $15.00, $6.80 and $3.30. Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price? Solution PO= $53.69
Suppose ABC Corp is expected to pay $2.00 per year in dividends per share for the foreseeable future. If the required return on their stocks is 12.15%, what is one share worth?
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3. In one year, Bold Betties Inc. will pay a $3 per share dividend and it is expected to grow by 3 percent per year. If the required return on this stock is 12 percent, what is the current stock price? Hint: Po = Dox(1+g) R-g # 3 E 4. In one year, Bold Betties Inc. will pay a $6 per share dividend and it is expected to grow by 4 percent per year. If the required return on this stock is 10 percent, what is the current stock price? Hint: Po = $ 4 R % 5 F5 T Dox(1+g) R-g * ^ D₁ R-g 6 F6 D₁ R-9 Y * F7 & 7 U PrtScn F8 8 Home F9 9 End F10 0 PgUp F11 P
BB8 Mining has a payout ratio of 30% and is due to pay a dividend of $2.30 next year. The stock is currently trading at $45 and the return on equity (ROE) is 15%. Using the dividend discount model, what is the cost of equity capital for BB8?
Assume Gillette Corporation will pay an annual dividend of $0.61 one year from now. Analysts expect this dividend to grow at 11.5% per year thereafter until the 6th year. Thereafter, growth will level off at 2.3% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 8.4%? The value of Gillette's stock is $ (Round to the nearest cent.)
What is the multi-stage DDM applied price of a stock that is expected to begin paying a $3 dividend 6 years from now. The firm is expected to grow dividends by 15% per year for the next four years after that, followed by a constant growth rate of 4% thereafter forever. Assume that investors require a rate of return of 16% for this firm's common shares. O $11.23 O $16.36 O $25.75 O $18.75
The Duo Growth Company just paid a dividend of $1.00 per share. The dividend is expected to grow at a rate of 24% per year for the next three years and then to level off to 5% per year forever. You think the appropriate market capitalization rate is 19% per year. a. What is your estimate of the intrinsic value of a share of the stock? (Use intermediate calculations rounded to 4 decimal places. Round your answer to 2 decimal places.) Intrinsic value per share b. If the market price of a share is equal to this intrinsic value, what is the expected dividend yield? (Use intermediate values rounded to 2 decimal places. Round your answer to 2 decimal places.) Expected dividend yield c. What do you expect its price to be one year from now? (Use intermediate values rounded to 4 decimal places. Round your answer to 2 decimal places.) Expected price d-1. What is the implied capital gain? (Use intermediate values rounded to 2 decimal places. Round your answer to 4 decimal places.) Implied Capital…
We are trying to value the technology company B&B's share price. If the appropriate industry PE for this type of company is 5 and you predict net income for B&B to be $3 million for the coming year. Assuming the firm has 1 million shares of common stock. What is the forecasted stock price for a year from now? $3 $10 $8 $15
Parcel Corporation expects to pay a dividend of $5.15 per share next year, and the dividend payout ratio is 50 percent. If dividends are expected to grow at a constant rate of 8 percent forever, and the required rate of return on the stock is 13 percent, calculate the present value of growth opportunities. Multiple Choice O O O $103.00 $79.23 $23.77 $71.85
Assume Gillette Corporation will pay an annual dividend of $0.69 one year from now. Analysts expect this dividend to grow at 11.1% per year thereafter until the 4th year. Thereafter, growth will level off at 1.6% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 8.7%? The value of Gillette's stock is $. nearest cent.) (Round to the

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