Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Use the Constant Dividend Growth Model to determine the expected annual growth rate of the dividend for ELO stock. The firm is expected to pay an annual divided of $8.9 per share in one year. ELO shares are currently trading for $144.48 on the NYSE, and the expected annual
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- Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 7.5 percent. LTD's recent dividend was $0.70. What is the value of Limited Brands stock when the required return is 9.5 percent? (Round your answer to 2 decimal places.)arrow_forwardJarett & Sons' common stock currently trades at $21.00 a share. It is expected to pay an annual dividend of $1.00 a share at the end of the year (D1 = $1.00), and the constant growth rate is 7% a year. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. __% If the company issued new stock, it would incur a 13% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. __ %arrow_forwardWhispering Natural Foods' current dividend is $4.00. You expect the growth rate to be 0 percent for years 1 to 5 , and 1 percent for years 6 to infinity. The required rate of return on this firm's equity is 11 percent. Determine the expected dividend at the end of year 5 Determine the expected dividend at the end of year 6 . Determine the expected price of the stock at the end of year 5 (after the year 5 dividend) determine the price of the stock todayarrow_forward
- Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent. Safeco’s recent dividend was $1.25.What is the value of Safeco stock when the required return is 10 percent? (Round your answer to 2 decimal places.)arrow_forwardDigital Industries paid a dividend of $2.00 per share of stock recently and expects to grow the dividend by 3% next year and beyond. Assuming a discount rate of 7%, how much value in the current stock price is attributable to the growth rate? Answer should be rounded to the nearest cent, e.g., $1.23"arrow_forwardThe common stock of Dayton Repair sells for $43.19 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 3.25 percent annually and expects to continue doing so. What is the required rate of return on this stock? O 7.65% O 8.70% 8.53% O 7.53%arrow_forward
- The common stock of Perforated Pool Liners, Inc. now sells for $44.00 per share. The table below shows the anticipated stock price and the dividend to be paid one year from now. Both the price and the dividend will depend on the level of growth experienced by the firm. State Probability, p(s) End-of-Year Price Annual Dividend Super high growth 0.090 $56 $3 High growth 0.196 $54 $3 Normal growth 0.398 $56 $2 Low growth 0.186 $48 $2 No growth 0.130 $46 $0 a. Calculate the holding period return (HPR) for each of the possible states, assuming a one-year holding period. (Use a negative sign to indicate a negative answer. Round your answer to 2 decimal places.) Super high growth % High growth % Normal growth % Low growth % No growth % b. What is the expected return for a holder of Perforated Pool Liners stock? (Round your answer to 2 decimal places.) Expected HPR % c. What is the standard deviation of the returns?…arrow_forwardUse the Dividend Discount Model to determine the expected annual growth rate of the dividend for ELO stock. The firm is expected to pay an annual divided of $3.07 per share in one year. ELO shares are currently trading for $27.81 on the NYSE, and the expected annual rate of return for ELO shares is 16.58%. Answer as a % to 2 decimal places (e.g., 12.34% as 12.34). Answer:arrow_forwardThe stock price of XYZ Co. is $24.82. Investors require an 8.46 percent rate of return on similar stocks. If the company plans to pay a dividend of $2.52 next year, what constant growth rate (in percent) is expected for the company's stock price? Answer to two decimals.arrow_forward
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