Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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What would you pay for a stock expected to pay a $2.25 dividend in one year if the expected
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- A firm will pay a dividend of $1.05 next year. The dividend is expected to grow at a constant rate of 3.42% forever and the required rate of return is 13.83%. What is the value of the stock?arrow_forwardSuppose you are thinking of purchasing the SunStar’s common stock today. If you expect SunStar to pay $0.80 dividend at the end of year one and $1.6 dividend at the end of year two and you believe that you can sell the stock for $15 at that time. If you required return on this investment is 10%, how much will you be willing to pay for the stock? a. $13.95 b. $14.44 c. 14.19 d. $15.51arrow_forwardWhat is the intrinsic value of a stock which last paid a dividend of $3.25 and is expected to grow at 17% over the next 2 years after which it will settle down at a stable rate of 8% per annum? The investor’s required rate of return is 12.5%.arrow_forward
- Suppose your company is expected to grow at a constant rate of 4 percent long into the future. In addition, its dividend yield is expected to be 7 percent. If your company expects to pay a dividend equal to $1.62 per share at the end of the year, what is the value of your firm's stock? Round your answer to the nearest cent.arrow_forwardSuppose you are thinking of purchasing the Luna Co.’s common stock today. If you expect Luna to pay $2.5, $2.625, $2.73, and $2.81 dividends at the end of year one, two, three, and four respectively and you believe that you can sell the stock for $40.97 at the end of year four. If you required return on this investment is 9%, how much will you be willing to pay for the stock today?arrow_forwardif a comapny expects to pay a dividend of $5 forever, what is the price of the companys shares today if the required rate of return is 14%?arrow_forward
- Last year Artworks, Inc. paid a dividend of $1.60. You anticipate that the company’s growth rate is 5 percent and have a required rate of return of 15 percent for this type of equity investment. What is the maximum price you would be willing to pay for the stock? Round your answer to the nearest cent.arrow_forwardYour firm wishes to maintain a 5% dividend growth rate. Your current common stock price is $26 and the company wishes it to remain at that price. If investors require a 9% return on their investment what should be the value of the current year’s dividend? Are you looking for D1 or D0?????arrow_forwardSuppose you are thinking of purchasing the Moore Co.’s common stock today. If you expect Moore to pay $2.5, $2.625, $2.73, and $2.81 dividends at the end of year one, two, three, and four respectively and you believe that you can sell the stock for $40.97 at the end of year four. If you required return on this investment is 9%, how much will you be willing to pay for the stock today?arrow_forward
- please helparrow_forwardA stock in your portfolio has just paid a dividend of $0.50. You expect the dividend to grow to $1.00 next year, to $1.50 the year after, and to $2.00 the year after that. Beyond that, you expect the dividend to grow at a rate of 5% forever. If the cost of capital for the stock is 12% per year, what is the value of the stock today? OA. $21.35 OB. $32.40 OC. $30.00 OD. $27.43arrow_forwardYou are considering purchasing stock in a company that is expected to pay a $ 3.34 dividend later this year and you require a return of 7.79%. Assume the dividend will continue to be paid each year thereafter and will grow every year as described below. C What is the maximum price you would be willing to pay if you expect a growth rate of 2%? $ 58.84 (Enter as a whole number with two decimal places, such as 10.19.) What is the maximum price you would be willing to pay if you expect a growth rate of 5%? $ 125.70 What is the maximum price you would be willing to pay if you expect a growth rate of 7%? $452.38 What is the relationship between the price of a stock and the firm's growth rate? O A. The stock price is exactly equal to the growth rate times the dividend. B. As the growth rate investors expect increases, the price they are willing to pay also increases. OC. As the growth rate investors expect increases, the price they are willing to pay decreases. O D. There is no relationship.arrow_forward
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