8-17. (Measuring growth) Septian, Inc.'s return on equity is 16 percent, and the man- agement plans to retain 60 percent of earnings for investment purposes. What will be the firm's growth rate? 8-18. (Common stock valuation) Abercrombie & Fitch's common stock pays a dividend of $0.70. It is currently selling for $34.14. If the firm's investors require a 10 percent return on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors? 8-19. (Common stock valuation) Schlumberger is selling for $64.91 per share and paid a dividend of $1.10 last year. The dividend is expected to grow at 4 percent indefi- nitely. What is the stock's expected rate of return? LO5 8-20. (Preferred stockholder expected return) You own 250 shares of Dalton Resources' preferred stock, which currently sells for $38.50 per share and pays annual dividends of $3.25 per share. a. What is your expected return? b. If you require an 8 percent return, given the current price, should you sell or buy more stock? 8-21. (Preferred stock expected return) You are planning to purchase 100 shares of pre- ferred stock and must choose between Stock A and Stock B. Stock A pays an annual dividend of $4.50 and is currently selling for $35. Stock B pays an annual dividend of $4.25 and is selling for $36. If your required return is 12 percent, which stock should you choose? 8-22. (Preferred stockholder expect310 of 619 rred stock is selling for $42.16 per share and pays $1.95 in dividends. What is your expected rate of return if you purchase the security at the market price?
8-17. (Measuring growth) Septian, Inc.'s return on equity is 16 percent, and the man- agement plans to retain 60 percent of earnings for investment purposes. What will be the firm's growth rate? 8-18. (Common stock valuation) Abercrombie & Fitch's common stock pays a dividend of $0.70. It is currently selling for $34.14. If the firm's investors require a 10 percent return on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors? 8-19. (Common stock valuation) Schlumberger is selling for $64.91 per share and paid a dividend of $1.10 last year. The dividend is expected to grow at 4 percent indefi- nitely. What is the stock's expected rate of return? LO5 8-20. (Preferred stockholder expected return) You own 250 shares of Dalton Resources' preferred stock, which currently sells for $38.50 per share and pays annual dividends of $3.25 per share. a. What is your expected return? b. If you require an 8 percent return, given the current price, should you sell or buy more stock? 8-21. (Preferred stock expected return) You are planning to purchase 100 shares of pre- ferred stock and must choose between Stock A and Stock B. Stock A pays an annual dividend of $4.50 and is currently selling for $35. Stock B pays an annual dividend of $4.25 and is selling for $36. If your required return is 12 percent, which stock should you choose? 8-22. (Preferred stockholder expect310 of 619 rred stock is selling for $42.16 per share and pays $1.95 in dividends. What is your expected rate of return if you purchase the security at the market price?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 15P
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Transcribed Image Text:8-17. (Measuring growth) Septian, Inc.'s return on equity is 16 percent, and the man-
agement plans to retain 60 percent of earnings for investment purposes. What will be
the firm's growth rate?
8-18. (Common stock valuation) Abercrombie & Fitch's common stock pays a dividend
of $0.70. It is currently selling for $34.14. If the firm's investors require a 10 percent
return on their investment from buying Abercrombie & Fitch stock, what growth rate
would Abercrombie & Fitch have to provide the investors?
8-19. (Common stock valuation) Schlumberger is selling for $64.91 per share and paid
a dividend of $1.10 last year. The dividend is expected to grow at 4 percent indefi-
nitely. What is the stock's expected rate of return?
LO5 8-20. (Preferred stockholder expected return) You own 250 shares of Dalton Resources'
preferred stock, which currently sells for $38.50 per share and pays annual dividends
of $3.25 per share.
a. What is your expected return?
b. If you require an 8 percent return, given the current price, should you sell or
buy more stock?
8-21. (Preferred stock expected return) You are planning to purchase 100 shares of pre-
ferred stock and must choose between Stock A and Stock B. Stock A pays an annual
dividend of $4.50 and is currently selling for $35. Stock B pays an annual dividend of
$4.25 and is selling for $36. If your required return is 12 percent, which stock should
you choose?
8-22. (Preferred stockholder expect310 of 619 rred stock is selling for $42.16
per share and pays $1.95 in dividends. What is your expected rate of return if you
purchase the security at the market price?
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