Prima Corporation's dividend per share next year is expected to be $3.02and the firm expects dividends to grow at a rate of 5% per year for theforeseeable future.If you can earn 13% on similar-risk investments, what is the most you wouldbe willing to pay per share? If you can earn only 10% on similar-riskinvestments, what is the most you would be willing to pay per share?Compare and contrast your findings, and explain the impact of changingrisk on share value.

A dividend is the part of a company's profit that is distributed by the company among its equity…

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what is the most you would be willing to pay per share?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Prima Corporation’s dividend per share next year is expected to be RM3.02and the firm expects dividends to grow at a rate of 5% per year for theforeseeable future.If you can earn 13% on similar-risk investments, what is the most you wouldbe willing to pay per share? If you can earn only 10% on similar-riskinvestments, what is the most you would be willing to pay per share?Compare and contrast your findings, and explain the impact of changing riskon share value.
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) and has a beta of 0.9. The risk - free rate is 5.2 %, and the market risk premium is 5%. Justus currently sells for $28.00 a share, and its dividend is expected to grow at some constant rate, g. 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 ?) Do not round intermediate calculations. Round your answer to the nearest cent.
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50) and has a beta of 0.9. The risk-free rate is 2.9%, and the market risk premium is 6%. Justus currently sells for $30.00 a share, and its dividend is expected to grow at some constant rate, g. 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 ?) Do not round intermediate calculations. Round your answer to the nearest cent. $
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D₁ = $2.25) and has a beta of 0.9. The risk-free rate is 4.7%, and the market risk premium is 6%. Justus currently sells for $29.00 a share, and its dividend is expected to grow at some constant rate, g. 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 ?) Do not round intermediate calculations. Round your answer to the nearest cent. $ es
You are considering an investment in Justus Corporation’s stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25) and has a beta of 0.9. The risk-free rate is 4.9%, and the market risk premium is 5%. Justus currently sells for $46.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stockprice at the end of 3 years? (That is, what is P3?)
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D₁ = $2.75) and has a beta of 0.9. The risk-free rate is 3.9%, and the market risk premium is 5%. Justus currently sells for $41.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market belleve will be the stock price at the end of 3 years? (That is, what is Pa?) Do not round Intermediate calculations. Round your answer to the nearest cent. $
You are considering an investment in Eagle Corporation's stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00) and has a beta of 0.9. The risk-free rate is 3.3%, and the market risk premium is 5%. Eagle currently sells for $31.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? Round your answer to the nearest cent.
Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $38.6 and its beta is 0.8. The risk-free rate is 2% and the expected market risk premium is 4.5%. 1. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00) and has a beta of 0.9. The risk-free rate is 3.7%, and the market risk premium is 4%. Justus currently sells for $33.00 a share, and its dividend is expected to grow at some constant rate, g. 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) Do not round intermediate calculations. Round your answer to the nearest cent. Only typing answer Please explain step by step
The owners of Sitty Inc need a return of 12% pa. The current performance of the firm leads to the belief that a dividend of sh. 5/= would be paid and after the year the price of the share would be Sh. 20 If the current price of the share is Sh. 22/= do you think the share is worth buying? How do you justify that the positive return could be generated despite the price falling to Sh.20 after one year? What maximum price do you think the Investors should pay for shares of ABC Limited
The Carpetto’s stock currently sells for $23 per share, will pay a dividend of $2.14 at the end of the current year, and the dividend is expected to grow at 7 percent per year in the future. Using the DDM approach, what is its cost of common equity? If the firm’s beta is 1.6, the risk-free rate is 9 percent, and the average return on the market is 13 percent, what will be the firm’s cost of common equity using the CAPM approach? If the estimated cost of equity is not the same using the CAPM and DDM approaches, how we can decide on the proper value for cost of equity? Explain.
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00) and has a beta of 0.9. The risk-free rate is 5.6%, and the market risk premium is 5%. Justus currently sells for $34.00 a share, and its dividend is expected to grow at some constant rate, g. 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 ?) Do not round intermediate calculations. Round your answer to the nearest cent. (Answer is not 9.92)

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