Retained earnings versus new common stock Using the data for a firm shown in the following table, calculate the cost of retained eamings and the cost of new common stock using the constant-growth valuation model. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Projected dividend per price per share growth rate share next year $3.25 Current market Dividend Underpricing Flotation cost per share $1.00 per share $1.75 $65.00 8% a. The cost of retained earnings is %. (Round to two decimal places.)

Suppose you purchased Spotlight Co.'s stock on Nov 1, 2015 and held it for one year, selling on Oct 31, 2016. What was your annual realized return? Price Dividend Date Nov 01 15 Feb 15 16 Aug 15 16 Oct 31 16 30 28 27 29 55 1.5 0.5

Expected Return of Common Stock Wooster Inc. has common stock with a market price of $120 per share. We expect the next dividend to be $9 and the constant growth rate to be 4% Calculate the following: Expected return (Total yield) Dividend yield Capital gain or loss yield b.

Example: Stock Valuation Consider the following information for the company Fledgling Electronics: Expected earnings per share at the end of year $8.33 Expected dividend per share at the end of year $5 Market capitalization rate (r) 15% Expected growth rate dividends (per year) 10% 1. Calculate the current price per share of Fledgling Electronics 2. Calculate the capitalized value of Fledgling's EPS if it had a no growth policy 3. Calculate the present value of Fledgling's growth opportunities

Changes in Growth and Stock Valuation Consider a firm that had been priced using a 7 percent growth rate and a 10 percent required rate. The firm recently paid a $1.00 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 8 percent rate. How much should the stock price change (in dollars and percentage)?

Two growth model Determine the intrinsic value of an equity share, given the following data: Last dividend (Do) - Rs 2.00 Growth rate for the next five years - 15 percent Growth rate beyond 5 years - 10 percent Assume a required rate of return

Given the following possible returns (dividends plus capital gains) over the coming year from P100,000 investment in  General Motors common stock:    State of Economy           Profitability             ReturnRecession                                0.20                    P-1,000      Normal year                            0.60                       1,500Boom                                      0.20                        2,500What is the standard deviation of returns?

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Subject: Financial strategy & policy Question No 3   (part i)                                                                            Answer the following. i) The future earnings, dividends, and common stock price of Nabeel Inc. are expected to grow 7% per year. Common stock currently sells for $23.00 per share; its last dividend was $2.00. a) Using the DCF approach, what is its cost of common equity? b) If the firm’s beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm’s cost of common equity using the CAPM approach? c) If the firm’s bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? d) If you have equal confidence in the inputs used for the three approaches, what is your estimate of cost of common equity?

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