Please show your work, thanks!! A firm is expected to pay an annual dividend of $1.20 in one year. If the current price per share of the firm's equity is $28 and if investors are requiring a 10% return on an investment in the firm's stock, then what growth rate do investors expect of the firm's dividends?

Please show your work, thanks!! A firm is expected to pay an annual dividend of $1.20 in one year. If the current price per share of the firm's equity is $28 and if investors are requiring a 10% return on an investment in the firm's stock, then what growth rate do investors expect of the firm's dividends?

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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How much must be deposited at the beginning of each quarter in an account that pays 5% compounded quarterly so that the account will contain $34,000.00 at the end of 7 years?
Your firm wishes to maintain a 5% dividend growth rate. Your current common stock price is $26 and the company wishes it to remain at that price. If investors require a 9% return on their investment what should be the value of the current year’s dividend? Are you looking for D1 or D0?????
Suppose a firm is expected to increase dividends by 16% in year 1 and by 12% in year 2. After that, dividends will increase at a rate of 5% per year indefinitely. If the last dividend was $1 and the required return is 18%. What is the price of the stock?
Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. a) What would be the likely stock price in year 5? b) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. i) Compute the current stock price for Whizcom Inc.ii) What would be the likely stock price in year 5?iii) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
If you were analyzing the consumer goods industry, for which kind of company in the industry would the constant growth model work best? Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.45 at the end of the year. Its dividend is expected to grow at a constant rate of 7.00% per year. If Walter’s stock currently trades for $29.00 per share, then the expected rate of return on the stock is Which of the following conditions must hold true for the constant growth valuation formula to be useful and give meaningful results?
The firm just paid an annual dividend of $0.8 per share and plans to increase that amount by 25% next year. After that, the firm expects the dividend will grow by 3% annually. What is the expected value of this stock if the required return is 13 percent? 9.9 10 10.3
A firm is expected to pay an annual dividend of $2.40 per share next year. The market price of stock is $75.25 and the growth rate is 2.5%. What is the cost of equity?
Laurel Enterprises pays annual dividends, and the next dividend is expected to be in one year. Laurel expects earnings next year of $3.58 per share and has a 50% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment; this is expected to continue forever. What do you estimate the firm's current stock price to be? (Hint: its next dividend is due in one year.) C The current stock price will be $ (Round to the nearest cent.)
You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $5 this year. Furthermore, you expect that they will pay out $2.50 of these earnings to shareholders in the form of a dividend at the end of this year. You estimate that LBE's return on new investments is 15% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to: OA. 3% OB. 6.5% OC. 7.5% OD. 4.5%
Consider a firm that distributes the entire annual earnings to its shareholders through dividends once a year. The firm’s dividends are expected to grow at a rate of 8% per year for the next 5 years until the end of 2035. From 2036 on, the firm’s growth rate is expected to be 4% per year forever. Assume that investors command 12% return on the investments comparable to the firm’s stock. In addition, the firm has just paid an annual dividend of $10 per share at the end of 2030. Required: If you were considering buying the firm’s shares on the first day of 2031, at what price would you buy the shares?

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