EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 7, Problem 21P
Summary Introduction
To determine: Current value of stock.
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Apple corporation is looking to invest in Dark Sky computing company. Dark Sky is specialized in weather forecasting software applications. Apple corporation is looking to invest in 500,000 shares of Dark Sky company in the end of the year. The current stock price of Dark Sky on the NASDAQ stock exchange is $24.84 per share, and the dividend yield for the coming year is expected to be 5.4%.
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An analyst for JPGR Bank & Trust is considering the value of ZBX stock. ZBX isn't currently paying dividends, but just announced that they will pay their first quarterly dividend of $1.40 per share, starting 5 quarters (1.25 years) from today. The analyst thinks its safe to assume that the firm will not increase the dividend anytime soon, and so will value it as if the dividend will not grow.
Given this information, what would be the value of ZBX stock if using a required rate of return of 16% APR compounded quarterly?
Enter answer in dollars and cents, rounded to the nearest cent.
b) Your broker has advised you
to buy shares of Fast repair
computer repair shop, which has
paid a dividend of $2 per share
annually and will (according to
the broker) continue to do so for
many years. The stock is
currently priced at $18. You
have good reason to think that
the appropriate rate of return for
this stock is 13% per year. Is the
stock's present price a good
approximation for the true
financial value? What would you
like to pay for the share and
should you buy or sell now?
Chapter 7 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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