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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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
Transcribed Image Text:Steady As She Goes Inc. will pay a year-end dividend of $2.50 per share. Investors expect the dividend to grow at a rate of 4%
indefinitely.
a. If the stock currently sells for $25.00 per share, what is the expected rate of return on the stock? (Do not round intermediate
calculations. Enter your answer as a whole percent.)
Expected rate of return
%
b. If the expected rate of return on the stock is 16.50%, what is the stock price? (Do not round intermediate calculations. Enter your
answers rounded to 2 decimal places.)
Stock price
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- You are considering an investment in the common stock of Keller Corp. The stock is expected to pay a dividend of $2 a share at the end of the year (D1=$2.00). The stock has a beta equal to 0.9. The risk-free rate is 5.6 percent, and the market risk premium is 6 percent. The stock’s dividend is expected to grow at some constant rate g. The stock currently sells for $25 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P3?)arrow_forwardK Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $46.30 per share. She expects the price of the stock to rise to $47.65 over the next 3 years. During that time she also expects to receive annual dividends of $6.79 per share. a. What is the intrinsic worth of this stock, given a required rate of return of 12%? b. What is its expected return? BCCCID a. The intrinsic worth of this stock is $ 50.22. (Round to the nearest cent.) b. The expected return is %. (Round to one decimal place.)arrow_forwardSteady As She Goes, Inc., will pay a year-end dividend of $2.80 per share. Investors expect the dividend to grow at a rate of 4% indefinitely. If the stock currently sells for $32 per share, what is the expected rate of return on the stock? If the expected rate of return on the stock is 17.5%, what is the stock price?arrow_forward
- The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $2. This dividend is expected to grow at an annual rate of 17 percent for the next 3 years. The dividend is expected to increase by $1 in Year 4 and to grow at a constant annual rate of 8 percent thereafter. If you require a 28 percent rate of return on an investment such as this, how much would you be willing to pay per share? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent. $arrow_forwardA stock is expected to pay a dividend of $1.75 at the end of the year (i.e., D1 = $1.75), and it should continue to grow at a constant rate of 10% a year. If its required return is 14%, what is the stock's expected price 4 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardA stock is expected to pay a dividend of $0.50 at the end of the year (i.e., D1 = $0.50), and it should continue to grow at a constant rate of 10% a year. If its required return is 14%, what is the stock's expected price 1 year from today? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forward
- Woidtke Manufacturing's stock currently sells for $38 a share. The stock just paid a dividend of $3.00 a share (i.e., Do = $3.00), and the dividend is expected to grow forever at a constant rate of 3% a year. What stock price is expected 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is the estimated required rate of return on Woidtke's stock (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answer to two decimal places. _%arrow_forwardB1) see picarrow_forwardA stock is expected to pay its first $0.8 dividend in 3 years from now (t=3). The dividend is expected to be paid annually forever and grow by 2% pa. The discount rate is 8% pa. Estimate what the stock price will be in 2.25 years from now. The stock price at time 2.25 is expected to be: Select one: a. $13.9408 b. $13.6675 c. $13.5924 d. $13.1368 e. $12.5855arrow_forward
- A firm is expected to pay a dividend of $2.05 next year and $2.20 the following year. Financial analysts believe the stock will be at their price target of $75 in two years.Compute the value of this stock with a required return of 12.0 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardSteady As She Goes Inc. will pay a tear-end dividend of $2.40 per share. Investors expect the dividend to grow at a rate of 5% indefinitely. a. If the stock currently sells for $24 per share, what is the expected rate of return on the stock? b. If the expected rate of return on the stock is 17.5%, what is the stock price?arrow_forward
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