Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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If a firm’s earnings per share grew from $1 to $2 over a 10-year period, the total growth
would be 100%, but the annual growth rate would be less than 10%. True or false? Explain.
(Hint: If you aren’t sure, plug in some numbers and check it out.)
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- As an analyst, you have gathered the following information on a company you are tracking. The current annual dividend is $1.75. Dividends are expected to grow at a rate of 14% over the next 4 years, and then decline linearly to 5% over the next 7 years, and then remain at a long term equilibrium growth rate of 5% in perpetuity; the required return is 10%. Calculate the value of the companyarrow_forward2. If a firm’s earnings per share grew from $1 to $2 over a 10-year period, the total growthwould be 100%, but the annual growth rate would be less than 10%. True or false? Explain. (Hint: Solve for the interest rate. Make sure you put the PV or FV as a negative number.)arrow_forwardSynovec Corporation is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth rate falling off to a constant 6.3 percent, thereafter. If the required return is 15 percent and the company just paid a dividend of $2.90, what is the current share price? Please show equations and what each letter is in the equation means. Thanks!arrow_forward
- Suppose that a firm's recent earnings per share and dividend per share are $2.55 and $1.40, respectively. Both are expected to grow at 11 percent. However, the firm's current P/E ratio of 15 seems high for this growth rate. The P/E ratio is expected to fall to 11 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Years First year Second year Third year Fourth year Fifth year Dividendsarrow_forwardMicrosoft Co. has the following projected sales, costs, net investment, and free cash flow in millions. The anticipated growth rate in free cash flows after year 6 is 5% per year forever. There are 7.43 billion shares outstanding, and investors require a return of 8% on the company's stock and a comparable P/E ratio of 21. Calculate the company stock price using the P/E comparable approach to find the terminal value. (Round to 2 decimals) 1 5 232 282 120 146 40 48 72 88 50 61 22 27 ($ in Billions) Sales Costs Taxes OCF (net income) Net investment FCF 2 244 126 42 76 53 23 3 256 132 44 80 55 25 4 269 139 46 84 58 26 6 296 153 50 92 64 28arrow_forwardAfter graduation, you plan to work for Asia Corporation for 12 years and then start your own business. You expect to save and deposit Php7,500 a year for the first 6 years (n = 1 through n = 6) and Php15,000 annually for the following 6 years (n = 7 through n = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a Php25,000 graduation gift which you will deposit immediately (n = 0). If the account earns 8% compounded annually, how much will you have when you start your business 12 years from now? A.Php228,145 B. Php250,712 C. Php260,302 D. Php263,907 E. Php277,797arrow_forward
- Give typing answer with explanation and conclusion Huang Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 22.5% for 3 years, after which dividends are expected to grow at a rate of 4% forever. If the firm's required return (rs) is 12%, what is its current stock price? Do not round intermediate calculations.arrow_forwardYour company has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 43.50% this year, 24.50% next year, after which growth should match the 6.00% industry average growth rate, which is a more sustainable rate. The last dividend paid (D0) was $1.40 and your firm's WACC is 12.54%. What is the value per share of your firm's stock?arrow_forwardComputech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly—at a rate of 26% per year—during Years 4 and 5, but after Year 5, growth should be a constant 4% per year. If the required return on Computech is 17%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. $arrow_forward
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