Financial Accounting A firm has a dividend yield of 9%. What is the expected return, if thefirm has a 70% payout ratio, a return on equity of 14%, and assumingdividends grow at a constant rate?

Formula:Expected return (r) = Dividend Yield + Dividend Growth Rate (g) Step 1: Calculate Dividend…

Answered: A firm has a dividend yield of 9%. What…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 5MC

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A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return based on the constant-growth dividend discount model (DDM)?
A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm's shares is $35.00, what is the required return based on the constant growth dividend discount model (DDM)? Required return
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Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $38.6 and its beta is 0.8. The risk-free rate is 2% and the expected market risk premium is 4.5%. 1. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.
Firm B has a capital intensity ratio of 2,optimal debt equity ratio of 1.5, and dividend payout ratio of 0.5. What profit margin must the firm achieve in orderto grow at a rate of 15% without new equity issue?
Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 4% forever. Its stock price is $35.1 and its beta is 1.5. The risk-free rate is 2% and the market risk premium is 4.5%. A. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.
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A firm has a dividend yield of 9%. What is the expected return, if the firm has a 70% payout ratio, a return on equity of 14%, and assuming dividends grow at a constant rate?