Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Balling Limited is a company listed on the NZX. Balling has announced it will make a dividend payment at the end of the year of $1.75 per share. The average annual growth rate in the company’s dividends over the past five years has been 5%. Balling’s shareholders have a required
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- Membo Inc. just paid a dividend of $4.6 per share. Dividends are expected to grow at 6%, 5%, and 3% for the next three years respectively. After that the dividends are expected to grow at a constant rate of 2% indefinitely. Stockholders require a return of 9 percent to invest in Membo’s common stock. Compute the value of Membo’s common stock today. (SHOW ALL WORK PLEASE)arrow_forwardLohn Corporation is expected to pay the following dividends over the next four years: $14, $10, $9, and $4. Afterward, the company pledges to maintain a constant 3 percent growth rate in dividends forever. If the required return on the stock Is 12 percent, what is the current share price? Multiple Cholce $56.47 $58.51 $60.27 $65.40 $55.59arrow_forwardPanhandle Industries Inc. currently pays an annual common stock dividend of $3.20 per share. The company's dividend has grown steadily over the past 12 years from $1.60 to its present level; this growth trend is expected to continue. The company's present dividend payout ratio, also expected to continue, is 50 percent. In addition, the stock presently sells at 5 times current earnings (that is, its P/E multiple is 5). Panhandle Industries stock has a beta of 1.15, as computed by a leading investment service. The present risk-free rate is 4.0 percent, and the expected return on the stock market is 12.0 percent. Do not round intermediate calculations. Round your answers to the questions below to two decimal places. a. Suppose an individual investor feels that 11 percent is an appropriate required rate of return for the level of risk this investor perceives for Panhandle Industries. Using the dividend capitalization model and the Capital Asset Pricing Model approaches, determine whether…arrow_forward
- Circuit City Stores (CC) recently paid a $.16 dividend. The dividend is expected to grow at a 23 percent rate. At the current stock price of $7.96, what is the return shareholders are expecting?arrow_forwardNoto Inc. just paid a dividend of $4.6 per share. Dividends are expected to grow at 6%, 5%, and 3% for the next three years respectively. After that the dividends are expected to grow at a constant rate of 2% indefinitely. Stockholders require a return of 9 percent to invest in Noto’s common stock. Compute the value of Noto’s common stock today.arrow_forwardIn practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the terminal stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.90. The dividends are expected to grow at 11 percent over the next five years. In five years, the estimated payout ratio is 48 percent and the benchmark PE ratio is 36. a. What is the target stock price in five years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the stock price today assuming a required return of 13 percent on this stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forward
- Metal Inc. has not issued a dividend. It is management's intention to do so beginning three years from today. The initial annual dividend is expected to be $3.00. Over the subsequent three years the annual dividends are expected to grow by 15% per year and then 10% per year for 4 years before slowing to a permanent growth rate of 3.5% per year. Determine the dollar value of the 2nd dividend.arrow_forwardThe following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.1 million shares outstanding, is now (1/1/22) selling for $56.00 per share. The expected dividend at the end of the current year (12/31/22) is 45% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS Year EPS 2012 $3.90 2017 $5.73 2013 4.21 2018 6.19 2014 4.55 2019 6.68 2015 4.91 2020 7.22 2016 5.31 2021 7.80 The current interest rate on new debt is 11%; Foust's marginal tax rate is 25%; and its target capital structure is 50% debt and 50% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 14.55 % Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. 10.89 b. Find Foust's WACC. Do…arrow_forward
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