b) Guzman Enterprises has three companies, Angel Inc., Charity Inc., and Joy Inc. Each of the companies will pay a dividend of $4 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company's stock is 9 percent, 12 percent, and 15 percent respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and the stock price?

b) Guzman Enterprises has three companies, Angel Inc., Charity Inc., and Joy Inc. Each of the companies will pay a dividend of $4 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company's stock is 9 percent, 12 percent, and 15 percent respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and the stock price?

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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Ren Sun Rising just paid a dividend of $2.43 per share. The company said that it will increase the dividend by 15 percent and 10 over the next two years respectively. After that, the company is expected to increase its annual dividend at 4.1 percent. If the require return is 11.5 percent, what is the stock price today?
Krell Industries has a share price of $21.81 today. If Krell is expected to pay a dividend of $1.18 this year and its stock price is expected to grow to $24.71 at the end of the year, what is Krell's dividend yield and equity cost of capital? The dividend yield is%. (Round to one decimal place.)
You are considering investing in Henderson Engineers Ltd. The book value of shareholders' equity is $40,0000,000. The firm has made a net profit of $ 660,000 for the year ending 30 June 2023. The earnings per share is $1.30. You also find the PE ratio for firms similar to Henderson is 12. a) What is the book value per share for Henderson Engineers Ltd? b) What price would you expect Henderson shares to sell for? c) Explain would you invest in this share and why.
At year end, Sampson Company's balance sheet showed total assets of $80 million, total liabilities of $50 million, and 1,000,000 shares of common stock outstanding. Next year, Malta is projecting that it will have net income of $2.9 million. If the average P/E multiple in Malta's industry is 16, (and this is an average stock) what should be the price of Sampson's stock? O $50.43 O $46.40 O $44.57 O $41.60
Beta Corporation’s current stock price is $90 and total number of shares is 1 billion. The company will generate free cash flow of $10 billion for the year ahead, all of which it will payout to its shareholders as a dividend. What would be the price at the ex dividend date? (SHOW YOUR WORK)
Weston Corporation just paid a dividend of $3.5 a share (l.e., Do = $3.5). The dividend is expected to grow 12% a year for the next 3 years and then at 3% a year thereafter. What is the expected dividend per share for each of the next 5 years? Do not round Intermediate calculations. Round your answers to the nearest cent. D1 $ D₂ = $ D3=$ D4=$ Ds = $
Weston Corporation just paid a dividend of $2.5 a share (i.e., Do = $2.5). The dividend is expected to grow 12% a year for the next 3 years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years? Do not round intermediate calculations. Round your answers to the nearest cent. D₁ = $ D₂ = $ D3 = $ D4 = $ D5 = $
Keidis Industries will pay a dividend of $4.15, $5.25, and $6.45 per share for each of the next three years, respectively. In four years, you believe that the company will be acquired for $59.00 per share. The return on similar stocks is 11.7 percent. What is the current stock price?
Anle Corporation has a current stock price of $21.99 and is expected to pay a dividend of $1.00 in one year. Its expected stock price right after paying that dividend is $23.92. a. What is Anle's equity cost of capital? b. How much of Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital gain? a. What is Anle's equity cost of capital? Anle's equity cost of capital is ☐ %. (Round to two decimal places.)
(This question has three parts.) Von Bora Corporation is expected pay a dividend of $2.07 per share at the end of this year and a $2.34 per share at the end of the second year. Immediately after Von Bora pays the $2.34 per share dividend at the end of the second year, you expect Von Bora's stock price to be $22.00 per share. Von Bora's cost of equity capital is 10.0%. Question A: What is the highest price that you would be willing to pay today for a share of Von Bora stock you plan to hold the stock for two years? $ per share (round to two decimal places) Question B: What is the highest price that you would be willing to pay today for a share of Von Bora stock if you plan to hold the stock for five years? $ per share (round to two decimal places) Question C: At the end of the second year (e.g., at time t=2), immediately before Von Bora pays the $2.34 per share dividend, at what price would you expect shares of Von Bora's stock to be selling? |per share (round to two decimal places)
Bob's Rawhide Company has a dividend payout ratio of 45%. Next year it will earn $0.75 per share and have a return on equity of 12%. The shareholders' required return is 8%. Calculate the company's growth rate of EPS. Using the earnings model, what is the value of the stock? Construct a data table that shows how the growth rate and value of the stock will change if the ROE ranges between 10% and 20%, in 1% increments. Now, using that data, create a scatter chart to show the relationship between the value of the stock and the ROE. Is the relationship linear? At what point does the model break down? Using the constant-growth model, what is the value of the stock?
ORcell Co. has the following dividend policy. Next year, the company will pay a dividend of $3. In year 2 the company will pay a dividend of $2.75. After year 2, the company expects to decrease its dividend at a constant rate of 3% per year indefinitely. If the return required by share holders is 13%, what is the price of the stock today? answer must be 17.86

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