A stock sells for $30. The next dividend will be $6 per share. If the return on equity ROE is a constant 15% and the company reinvests 20% of earnings in the firm, what must be the opportunity cost of capital? (Do not round intermediate calculations.) Cost of Capital

Q: Anle Corporation has a current stock price of $21.38 and is expected to pay a dividend of $1.00 in…

A: Current price per stock = p0 = $21.38Next Year expected Dividend per share = d1 = $1Next Year price…

Q: Suppose that a company yields mean returns of 20% (equity), and 9% mean returns on every peso the…

A: The mean return on equity refers to the weighted average return on equity. The return on bonds is…

Q: Company Z is a computer manufacturing company that is considering diversifying into financial…

A: The capital structure of a corporation is defined as its funding mix, which includes both debt and…

Q: A company expects earnings in the current year to be $5 per share, and plans to pay a $3 dividend to…

A: A stock is a financial security issued by a corporation to obtain equity capital from the financial…

Q: If ROE > rS, then a company will increase shareholder value (stock price will go up) when retaining…

A: The return on equity is a metric used to evaluate the yield that the company is providing to the…

Q: Firm B has a capital intensity ratio of 2,optimal debt equity ratio of 1.5, and dividend payout…

A:

Q: Preferred Stock: The firm has determined it can issue preferred stock at $75 per share p ralue. The…

A: In this problem we have to calculate cost of equity and cost of preference shares and compare them.

Q: How can i solve this problem without using excel? A financial calculator is ok. A stock is expected…

A: Stock price today is $23.26. Capital gain rate is 3.18%. Dividend yield of stock is…

Q: IBM expects to pay a dividend of $6 next year and expects these dividends to grow at 3.92% a year.…

A: Cost of equity by dividend growth model: Cost of equity = D1/P0 + g D1 is expected dividend P0 is…

Q: Show work/formulas used. Calculate the required return for new AND existing equity if the stock…

A: The cost of existing and new equity can be determined by using the constant dividend growth rate…

Q: Assume a firm is planning to raise €15,000,000 capital from the market. The firm has a long-term…

A: Under residual dividends model, dividends is- = Net Income - (target equity ratio* total capital…

Q: What is the company’s cost of capital? 1. CAPM = rrf + (rm – rrf)B = required rate of return on…

A: 1.Risk-Free Rate (rrf) = 3% or 0.03Market Premium (rm – rrf) = 5% or 0.05Beta (B) = 1.2 Computation…

Q: IBM expects to pay a dividend of $2 next year and expects these dividends to grow at 8% a year. The…

A: To Find: Cost of equity capital

Q: The Management of Uno Corporation is attempting to estimate the firm's cost of equity capital.…

A: Dividends of the corporation in dividend growth model are assumed to grow at a very constant rate in…

Q: The correct answer is shown. If the interest rate is 8%, the expected growth rate of the firm for…

A: Ex dividend value is calculated as follows:-PV= wherePV= Ex dividend value =Current profits of firmi…

Q: Summit Systems will pay a dividend of $1.48 this year. If you expect​ Summit's dividend to grow by…

A: Expected dividend (D1) = $1.48 Growth rate (g) = 5.3% Cost of capital (r) = 10.7%

Q: A company currently has EBIT of $25,000 and is all-equity financed. The company expect EBIT to stay…

A: Capital structure refers to the mix of different sources of financing that a company uses to operate…

Q: BM expects to pay a dividend of $8 next year and expects these dividends to grow at 3.15% a year.…

A: IBM Share Price = Dividend Next Year / (Cost of Equity - Growth Rate)

Q: Blue is expected to pay a dividend of $1.69 in one year. You expect this dividend to grow by 6.1%…

A: As per the dividend discount model, the current stock price is the sum of the present value of all…

Q: A firm has determined its optimal capital structure which is composed of the following sources.…

A: Price of preferred stock (P0) = RM 75 Preferred dividend (D) = RM 10 Cost of issuing and selling…

Q: A company is expected to pay a dividend of $2 per share at the end of year 1, and it is expected to…

A: When the company receives profits and distributes them among the shareholders. That share of profit…

Q: Assume capital markets are perfect (i.e. the Modigliani- Miller Theorems hold). The Cat Nap Pet…

A: In a world with perfect capital markets and the Modigliani-Miller Theorems, a firm's equity value is…

Q: Anle Corporation has a current price of $29, is expected to pay a dividend of $1 in one year, and…

A: The return on an investment consists of (1) dividend / interest and (2) capital gain / loss. The…

Q: Suppose Microsoft Co. will pay a dividend of $1.9 per share one year from now (year 1), and $3.8 per…

A: The Dividend Discount Model (DDM) is a technique utilized to assess the underlying worth of a stock…

Q: Mackenzie Company has a price of $33 and will issue a dividend of $2.00 next year. It has a beta of…

A: Dividends are a part of net income that is paid to the shareholder of the company in the form of a…

Q: A firm plans to grow at an annual rate of at least 16%. Its return on equity is 24%. Suppose the…

A: Dividend payout ratio is calculated as follows:-Dividend payout ratio = 1-Retention ratio

Q: A firm's optimal capital structure is 50% equity. If the firm has $15 million in retained earnings…

A: Optimal capital structure is 50% equityCurrent Retained earnings with firm = $15 million

Q: A firm just paid a common dividend of $0.30 and expects a 10% growth in dividends. Shareholders’…

A: We need to use constant growth model which assumes that dividend will grow at constant rate. This is…

Q: Krell Industries has a share price of $21.68 today. If Krell is expected to pay a dividend of $0.93…

A: We invest in stocks and securities with the expectation that our invested amount will grow. This…

Q: The cost of raising capital through retained earnings is  (GREATER THAN / LESS THAN)  the cost of…

A: The question is based on the concept for calculation of the cost of different components of capital.…

Q: A company is estimating its optimal capital structure. Now the company has a capital structure that…

A: The Beta of security indicates the risk related to the market and show much the stock is volatile…

Q: Anle's Corporation has a current price of $12, is expected to pay a dividend of $1 in one year, and…

A: Dividend yield can be calculated by using formula below.Dividend yield = Dividend/ current stock…

Q: Aboudy Corporation's stock price is currently $22.00 per share. The company has just paid a dividend…

A: In this question we require to calculate the company's cost of equity using Gordon Model.

Q: Anle Corporation has a current stock price of $19.71 and is expected to pay a dividend of $0.95 in…

A: Corporate entities expect to distribute profits to shareholders in return for dividends. The value…

Q: Anle Corporation has a current stock price of $15.42 and is expected to pay a dividend of $0.85 in…

A: As per the given information:

Q: - Consider a firm that has EPS of $5 at the end of the first year, a dividend-payout ratio of 30%, a…

A: Discount rate is 16% Return on retained earning is 20% EPS is $5 Dividend Payout ratio is 30%   To…

Q: As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have…

A: When companies earn profits from their financial operations, they distributed part of their profits…

Q: A company will produce $3.00 in earnings per share at the end of the year. Reinvested earnings can…

A: We need to use formula below to calculate PVGO of the company. The equation is whereD1= next…

Q: Start-Up Industries is a new firm that has raised $400 million by selling shares of stock Management…

A: Raised amount (Book value)$400 millionReturn on equity20%Cost of equity12%Retention ratio50%

Q: A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per…

A: The dividend yield is the percentage ratio that tells us about how much dividend a company is paying…

Q: IBM expects to pay a dividend of $4 next year and expects these dividends to grow at 7% a year. The…

A: Next year dividend = D1 = $4 Growth rate = g = 0.07 or 7% Price per share = P0 = $90 Cost of equity…

Q: Dorpac Corporation has a dividend yield of 1.6%. Its equity cost of capital is 7.1%, and its…

A: Dividend discount model refers to a stock valuation model which is used by the company for…

Q: If retained earnings were used instead of new issuances, what wo

A: In this question, we have to find the cost of equity and the new financing cost.

Q: Gillette Corporation will pay an annual dividend of $ 0.63 one year from now. Analysts expect this…

A: Current Stock Price = Value that a particular stock would fetch in the open market, It is calculated…

Q: Costly Corporation is considering using external equity financing. Currently, the firm's stock is…

A: Current price (P0) = $60 Last dividend (D0) = $2 g = 5% Floatation cost (f) = 10% Let r = Cost of…