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2. What are flotation costs?
3. How is cost of common equity computed for no growth stock? for constant growth stock?
4.What is a dividend yield?
5. Define the following terms used in
a. Risk-free rate
b. Stock's Beta Coefficient
C. Market risk premium
6. How is cost of equity under Bond Yield Plus Risk Premium Approach computed?
7. How is weighted average cost of capital (WACC) computed?
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- 1. Explain the three varying characteristics of common shares. 2. What are flotation costs? 3. How is cost of common equity computed for no growth stock? for constant growth stock? 4.What is a dividend yield? 5. Define the following terms used in Capital Asset Pricing Model (CAPM) to compute for cost of equity: a. Risk-free rate b. Stock's Beta Coefficient C. Market risk premium 6. How is cost of equity under Bond Yield Plus Risk Premium Approach computed? 7. How is weighted average cost of capital (WACC) computed?The most popular method that firms use to calculate the cost of equity is ________. Group of answer choices flotation cost model CAPM coefficient of variation dividend discount model bond yield plus risk premiumn the formula ke >= (D1/P0) + g, what does (D1/P0) represent? Select one: a. The expected capital gains yield from a common stock b. The interest payment from a bond c. The expected dividend yield from a common stock d. The dividend yield from a preferred stock
- For the following stock investment, find (a) the total purchase price, (b) the total dividend amount, (c) the capital gain or loss, (d) the total return, and (e) the percentage return. Ignore broker and SEC fees. (a) What is the total purchase price? $ (b) What is the total dividend amount? (c) What is the capital gain or loss? (d) What is the total return on investment? (e) What is the percentage return? (Round to the nearest percent.) Number of shares Purchase price per share Dividend per share Sale price per share 70 $40 $2 $82What does the capital asset pricing model (CAPM) calculate? a. The expected rate of return on an individual stock with respect to the risk-free rate of return b. The expected rate of return of an individual stock based on its overall risk c. The expected rate of return of an individual stock with respect to its market risk only d. The expected rate of return of an individual stock reflecting its financial risk Clear my choiceThe expected return on a stock is called the __ from the investor's perspective, and the __ from the company's perspective. A. required return; cost of equity B. required return; cost of capital C. excess return; cost of equity D. excess return; cost of capital
- The appropriate benchmark for the return on equity is: A)the weighted average cost of capital. B)the cost of equity. C)the interest free rate. D)none of the above.Which investment below would be most appropriate for investors who need income? A. International stocks B. DOW Index Funf (DIA) C. Disney and Exxom Moble stocks D. Dividend Paying ETFs E. A, B, D are correct F. B,C,D are correct G. All of them are correctIn the Discounted Cash Flow Model (aka. Dividend Valuation Model) for cost of equity, if an asset has no expected dividend, its expected return would be best described as the _________. (A).dividend yield. (B).market risk premium. (C).expected market return. (D).capital gains yield
- i) Calculate the expected return for each stock assuming the Capital Asset Pricing Model (CAPM) is valid, and explain if they are correctly priced. Show your calculations.A dividend valuation model such as the following is frequent. where: Pi = the current price of Common Stock i D1 = the expected dividend in Period 1 ki = the required rate of return on Stock i gi = the expected constant-growth rate of dividends for Stock i Identify the three factors that must be estimated for any valuation model, and explain why these estimates are more difficult to derive for common stocks than for bonds . Explain the principal problem involved in using a dividend valuation model to value: (1) companies whose operations are closely correlated with economic cycles. (2) companies that are of very large and mature. (3) companies that are quite small and are growing rapidly.Q3: With a dividend discount model, how do you estimate the cost of equity capital? What is the critical variable in this model?
