Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its expected
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- 'S A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% per year thereafter. The expected rate of return on the stock is 14%. a. What is the current price of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current price b. What is the expected price of the stock in a year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected pricearrow_forwardSuppose you know that a company's stock currently sells for $66.60 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If It's the company's policy to always maintain a constant growth rate In its dividends, what is the current dividend per share? Note: Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Dividend per sharearrow_forwardThe future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 7% per year. Callahan's common stock currently sells for $25.25 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 2.0, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost…arrow_forward
- Paccar's current stock price is $95.47, and it is likely to pay a $2.79 dividend next year. Because analysts estimate Paccar will have an 9.5 percent growth rate, what is its required return? Note: Round your answer to 2 decimal places.arrow_forwardSummerdahl Resort's common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50), and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? Round your answer to two decimal places.arrow_forwardTresnan Brothers is expected to pay a $3.20 per share dividend at the end of the year (l.e., D₁ = $3.20). The dividend is expected to grow at a constant rate of 3% a year. The required rate of return on the stock, rs, is 12%. What is the stock's current value per share? Round your answer to the nearest cent.arrow_forward
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