Please thank you Sooner-than-Later (STL) Inc. announces that it will pay a $75 per dividend nextyear, followed by a final dividend of $30 per share in the year after. Mrs.Donna Holder has 50 shares in STL Inc. She wishes to limit her income frominvestments to no more than $35 per share in the first year. Demonstrate through relevantcomputations, how she can achieve this goal through homemade dividends if therequired return on STL Inc’s shares is 9%. What will be Mrs. Holder’s earningin the second year? Show detailed workings

Please thank you Sooner-than-Later (STL) Inc. announces that it will pay a $75 per dividend nextyear, followed by a final dividend of $30 per share in the year after. Mrs.Donna Holder has 50 shares in STL Inc. She wishes to limit her income frominvestments to no more than $35 per share in the first year. Demonstrate through relevantcomputations, how she can achieve this goal through homemade dividends if therequired return on STL Inc’s shares is 9%. What will be Mrs. Holder’s earningin the second year? Show detailed workings

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter13: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 35P

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Jan purchased 100 shares of Peach Computer stock for $18 per share, plus a $45 brokerage commission. Every 6 months she received a dividend from Peach of 50 cents per share. At the end of 2 years, just after receiving the fourth dividend, she sold the stock for $23 per share and paid a $58 brokerage commission from the proceeds.What annual rate of return did she receive on her investment? Solution: 1. NPW=PW of Benefits - PW of Costs=0 o Number of terms n= o PW of Benefits = (P/A,i*,n)+ (P/F,i*,n); O PW of Costs= 2. Find IRR through interpolation o Try i*=7%, NPW= o Try i*=8%, NPW= o Through interpolation, ROR= % 3. Other Calculations: o Nominal rate r= %; o Effective rate iz= %.
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