FIN620_Quiz HW 8

Stock Expected Dividend Expected Capital Gain A $0 $10 B $5 $5 C $10 $0 A.)If each stock is priced at $175, what are the expected netpercentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%) and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? B.) Suppose that investors pay 40% on tax dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A,B and C each sdell for? Assume the expected dividend is a level perpetuity. (Please answer B)

Question content area top Part 1 ​(Preferred stock​ valuation)  Kendra​ Corporation's preferred shares are trading for ​$29 in the market and pay a ​$4.70 annual dividend. Assume that the​ market's required yield is 17 percent.   a.  What is the​ stock's value to​ you, the​ investor? b.  Should you purchase the​ stock?       Question content area bottom Part 1 a.  The value of the stock to​ you, the​ investor, is ​$enter your response here per share.  ​(Round to the nearest​ cent.)

Question content area top Part 1 ​(Preferred stock​ valuation)  Kendra​ Corporation's preferred shares are trading for ​$40 in the market and pay a ​$6.40 annual dividend. Assume that the​ market's required yield is 14 percent.   a.  What is the​ stock's value to​ you, the​ investor? b.  Should you purchase the​ stock?       Question content area bottom Part 1 a.  The value of the stock to​ you, the​ investor, is ​$enter your response here per share.  ​(Round to the nearest​ cent.) Part 2 b.  Should you acquire the​ stock?  ​(Select from the​ drop-down menus.)   You ▼   should should not acquire the stock because it is currently ▼   overpriced underpriced in the market.

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Question content area top Part 1 ​(Preferred stock​ valuation)  ​Pioneer's preferred stock is selling for ​$40 in the market and pays a ​$4.40 annual dividend.   a.  If the​ market's required yield is 9 ​percent, what is the value of the stock for that​ investor? b.  Should the investor acquire the​ stock?       Question content area bottom Part 1 a.  The value of the stock for that investor is ​$enter your response here per share.  ​(Round to the nearest​ cent.)

QUESTION 1 Dixon Corp’s preferred stock does not mature (it is a “perpetual preferred”).  Each share of preferred stock pays a fixed dividend of $5.15 per year, and is currently selling for $62.  Estimate Dixon’s marginal cost of preferred equity.  Dixon faces a marginal tax rate of 30%.     10.10%     12.04%     5.81%     7.07%     8.31%   QUESTION 2 Check the information provided for Terra Corp. The project’s cash flow for the last year is expected to be:     $143,700     $123,700     $146,200     $149,200     $172,200   QUESTION 3 Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years.  These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value.  If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years.  Estimate Dixon's marginal pre-tax cost of debt.  Dixon faces a marginal tax rate of 30%.     5.10%     4.15%…

Question content area top Part 1 ​(Preferred stock​ valuation)  ​Pioneer's preferred stock is selling for ​$21 in the market and pays a ​$2.70 annual dividend.   a.  If the​ market's required yield is 11 ​percent, what is the value of the stock for that​ investor? b.  Should the investor acquire the​ stock?       Question content area bottom Part 1 a.  The value of the stock for that investor is ​$enter your response here per share.  ​(Round to the nearest​ cent.) Part 2 b.  Should the investor acquire the​ stock?  ​(Select from the​ drop-down menus.)   The investor ▼   should should not acquire the stock because it is currently ▼   underpriced overpriced in the market.

Question 21 As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D 0 = $0.80; P 0 = $22.50; and g L = 8.00% (constant). Based on the dividend growth model, what is the cost of common from reinvested earnings?   a. 11.25%   b. 10.69%   c. 11.84%   d. 12.43%   e. 13.05% Muscarella Inc. has the following balance sheet and income statement data: Cash $  14,000 Accounts payable $  42,000 Receivables 70,000 Other current liabilities     28,000 Inventories   210,000    Total CL $  70,000    Total CA $294,000 Long-term debt 70,000 Net fixed assets   126,000 Common equity   280,000    Total assets $420,000    Total liab. and equity $420,000 Sales $280,000     Net income $  21,000     The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70,…

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Help Save & Exit Submit Judy's Boutique just paid an annual dividend of $2.41 on its common stock. The firm increases its dividend by 3.20 percent annually. What is the company's cost of equity if the current stock price is $38.68 per share? Multiple Choice 9.17% 10.00% 9.43% 9.63% 8.91% 32 of 40 曲 Next > < Prev

Question content area top What are the formulas to figure out these problems?  I have the answer but I want to be able to figure out how to get the answer. Part 1 ​(Common stock​ valuation)  Dubai​ Metro's stock price was at ​$100 per share when it announced that it will cut its dividend for next year from ​$10 per share to ​$6 per​ share, with additional funds used for expansion. Prior to the dividend​ cut, Dubai Metro expected its dividends to grow at a 4 percent​ rate, but with the​ expansion, dividends are now expected to grow at 7 percent. How do you think the announcement will affect Dubai​ Metro's stock​ price?       Question content area bottom Part 1 a.  What is the​ investor's required rate of return for Dubai​ Metro's stock?   14.0014.00​% ​(Round to two decimal​ places.) Part 2 b.  What would be the price of Dubai​ Metro's stock if they cut the dividend to ​$6​?   ​$85.7185.71   ​(Round to the nearest​ cent.) Part 3 c.  How do you think Dubai​ Metro's stock price…

ADC 1) Based on End-of-Chapter Problem 6 in Chapter 5 The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end- of-year price depend on the state of the economy by the end of the year as follows: Stock Price Dividend. $2.00 $50 1.00 43 0.50 34 a. Calculate the expected holding-period return and standard deviation of the holding- period return. All three scenarios are equally likely. Boom Normal economy Recession b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%.