Consider the case of Blue Llama Mining Inc. (BLM): Five years of realized returns for BLM are given in the following table. Remember: 1. While BLM was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for BLM for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 13.75% 9.35% 16.50% 23.10% 7.15% Given the preceding data, the average realized return on BLM’s stock is _____%. The preceding data series represents (a sample / the universe / the population) of BLM’s historical returns. Based on this conclusion, the standard deviation of BLM’s historical returns is ______%. If investors expect the average realized return from 2014 to 2018 on BLM’s stock to continue into the future, its coefficient of variation (CV) will be _______.
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
| 1. | While BLM was started 40 years ago, its common stock has been publicly traded for the past 25 years. |
| 2. | The |
| 3. | The historical returns for BLM for 2014 to 2018 are: |
|
|
2014
|
2015
|
2016
|
2017
|
2018
|
|---|---|---|---|---|---|
| Stock return | 13.75% | 9.35% | 16.50% | 23.10% | 7.15% |
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
