Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year i the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%

Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year i the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%

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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An investor expects a14% return on a $ 50 stock that pays a dividend of $ 2.50. Was is the implied capital gain rate on the price appreciation?
Y6 Consider a stock priced at $40 that pays an annual dividend of $ 1 per share. An investor purchases the stock on margin, paying $20 per share and borrowing the remainder from the brokerage firm at 10 percent annual interest. a. If, after one year, the stock is sold at a price of $60 per share, what is the return on the stock? b. If investors had used only personal funds rather than borrowing funds, what would have been the stock return?
Consider the following security: Brous Metalworks Earnings Per Share, Time = 0 $2.00 Dividend Payout Rate 0.250 Return on Equity 0.150 Market Capitalization Rate 0.125 Required: Using the information in the tables above, please calculate the sustainable growth rate, dividends per share, and intrinsic value per share. Then solve for the present value of growth opportunities. (Use cells A5 to B8 from the given information to complete this question.) Brous Metalworks Sustainable Growth Rate Dividends per share (Next Year) Intrinsic Value No-Growth Value Per Share Present Value of Growth Opportunities (PVGO)
h. Calculate the total return % in each of the following instances: a. Do = $2.00, dividend growth = 4%, Po = $50, P: = $60 b. Po = $32, Dividend yield % = 5%, P1 = $30 c. Dividend Yield = 4%; Capital Gain = %3D $20; DI = $4
None
Q 2.3. An investment costs $1,000 and pays a return of $1,050. What is its rate of return? Q 2.4. An investment costs $1,000 and pays a net re Q 2.6. You buy a stock for $40 per share today. you can sell it for $45 right after the dividend is paid, what would be its dividend yield, what would be its capital gain (also quoted as a capital gain yield), and what would be its total rate of return? It will a dividend of $1 next month. If alck Com rat
QUESTION 16 If D1=$5.00, rs-10%, and g = -3%, would anyone buy the stock? If so, at what price?
3.1-3.3 Corporation A's stock has a price of $50 at t=0. It is expected to pay a dividend of $2 at t=1 and its expected price at t=1 but right after paying the dividend is $52. 3.1 What is this stock's expected current yield?- 3.2 What is this stock's expected capital gain rate?- 3.3 What is this stock's equity cost of capital?
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data about the company's stock: D1 $1.45; PO = $25; and g = 6.50% (constant). What is the cost of common from issuing new stock, assuming the flotation cost is 10% of the stock price? = 13.59% 11.10% 12.94% 11.68% 12.30%
A MOVING toO anotner question will save this response. Question 15 You bought a stock for $39 and you received dividends of $4. The stock is now selling for $47. What is your total percentage return? (please answer in decimal numbers, ie., use 0.05 in stead of 5%) A Moving to another question will save this response. P Type here to search 9.
If D₁=$5.00, rs-10%, and g = -5%, would anyone buy the stock? If so, at what price? No. It is -$2.60. Yes. It is $33.33. No. It is -$33.33. Yes. It is $55.00 No. It is $25.00. Yes. It is $35.98.
4. Rivoli Inc. hired you as a consultant to help estimate its cost of capital. You have been provided with the following data: D0 = $0.80; P 0 = $25.00; and g = 8.00% ( constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations. a . 9.85% b. 14.32% c. 11.46% d . 9.74% e. 13.17%

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