A firm pays a $1.50 dividend at the end of year one. It has a share price of $60 (Pa constant growth rate (g) of 8 percent. . Compute the required (expected) rate of return (K) (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Required rate of return Also indicate whether each of the following changes would make the required rate of return (K) go up or down. (In each question below, assume only one variable changes at a time. No actual numbers are necessary) b. If the dividend payment increases, Oke will go up. O ke will go down O Ke remains constant. c. If the expected growth rate increases; O ke will go up. O Ke will go down O Ke remains constant. d. If the stock price increases; O ke will go up. O Ke will go down. O Ke remains constant.
A firm pays a $1.50 dividend at the end of year one. It has a share price of $60 (Pa constant growth rate (g) of 8 percent. . Compute the required (expected) rate of return (K) (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Required rate of return Also indicate whether each of the following changes would make the required rate of return (K) go up or down. (In each question below, assume only one variable changes at a time. No actual numbers are necessary) b. If the dividend payment increases, Oke will go up. O ke will go down O Ke remains constant. c. If the expected growth rate increases; O ke will go up. O Ke will go down O Ke remains constant. d. If the stock price increases; O ke will go up. O Ke will go down. O Ke remains constant.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A firm pays a $1.50 dividend at the end of year one. It has a share price of $60 (P) and a
constant growth rate (g) of 8 percent.
a. Compute the required (expected) rate of return (K). (Do not round intermediate
calculations. Round the final answer to 2 decimal places.)
Required rate of return
%
Also indicate whether each of the following changes would make the required rate of
return (K) go up or down. (In each question below, assume only one variable changes at a
time. No actual numbers are necessary.)
b. If the dividend payment increases;
O Ke will go up.
O Ke will go down
Oke remains constant.
c. If the expected growth rate increases;
O ke will go up.
O Ke will go down
O Ke remains constant.
d. If the stock price increases;
O ke will go up.
O Ke will go down.
O Ke remains constant.
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