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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Liphips Ltd has just paid a dividend per share of €1.20. Shares are valued only on the basis of
expected dividends. An annual sustainable growth of dividends of 4% is assumed. The
appropriate discount rate (i) is 10% per year. The planning horizon is limited to 20 years.
Compute the share value.
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- a) Suppose you borrow $2,000 at the annual interest rate of 9%, and you are required to pay it back in 12 equal monthly installments, the first one is due at the end of the first month. i) How much is the monthly installment? ii) Draw up an amortization schedule. b) BK Ltd has just paid a dividend per share of $1.20. Shares are valued only based on expected dividends. An annual sustainable growth of dividends of 4% is assumed. The appropriate discount rate (i) is 10% per year. The planning horizon is limited to 20 years. Compute the share value.arrow_forwardThe Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Current stock price b. Value of ROE c. Amount % per sharearrow_forwardorever 21 is expected to pay an annual dividend of $3.52 per share in one year, which is then expected to grow by 8% per year. The required rate of return is 14%. What is the stock's value?arrow_forward
- The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…arrow_forwardTTY currently pays a dividend of Ghc1.60 per year. A current price is Ghc118.36. An analyst makes the following estimates: The current required return on equity for TTY is 12 percent. Dividends will grow at 14 percent for the next two years, 12 percent for the following five years, and 10.2 percent thereafter. Based only on the information given, estimate the value of TTY using a three-stage Dividend discount Model approacharrow_forward
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