A firm whose shares are trading at 2 times book value is forecastedto earn a return on book value of 14 percent next year. Calculatethe expected return to buying this stock for the following forecastsof residual earnings growth after the forward year: 4 percent, 6percent, and 8 percent. What is the expected return if no growth isexpected?

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Answered: firm whose shares are trading at 2…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?
The current price of stock A is $40. The expected dividend for the next year is $2. The dividend is expected to grow at a constant growth rate in the future. The required return of stock A is 15%. Using constant-growth dividend model, the implied dividend growth rate is _______. A. 10% B. 5% C. 15% D. 0%
A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 9.0%, and the constant growth rate is g = 4.0%. What is the current stock price? Select the correct answer. a. $31.20 b. $33.18 c. $30.21 d. $34.17 e. $32.19
A company is expected to maintain a constant 3 percent growth rate in its dividends indefinitely. If the company’s stock has a dividend yield of 4.85 percent, what is the required return on the stock? (Hint: dividend yield is a 2 stock’s dividend divided by its price.)
The expected constant-growth rate of dividends is _% for a stock currently priced at $76, that just paid a dividend of $2, and has a required return of 15%?
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Expected Return of Common Stock Wooster Inc. has common stock with a market price of $120 per share. We expect the next dividend to be $9 and the constant growth rate to be 4% Calculate the following: Expected return (Total yield) Dividend yield Capital gain or loss yield b.
The expected constant-growth rate of dividends is $8, and has a required return of 18%? % for a stock currently priced at $76, that just paid a dividend of Esc F1 DII F2 F3 F4 FS F6 @ 4 Tab W R IT く-6

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