For questions (1-6) bold the correct answer or completewith your result if none is correct.(1-2) The expected return on a stock with a current price of 20lei is 16%. The corporation is expected to deliver a dividendof 1.2 lei per share.[1] The dividend yield expected by the investor equals:(a) 4% (b) 6% (c) 8% (d) 12%[2] The selling price of the stock equals:(a) 22 lei (b) 24 lei (e) 26 lei (d) 30 lei(3-4) The table below presents the cash-flows associated to aninvestment project:YearCash-flow-1000 700 800012[3] For a cost of capital of 10% the NPV equals:(a) 297.52 (b) 500 (c) 363.64 (d) 388.43[4] The internal rate of return of the project is:(a) 28% (b) 31.05% (c) 34% (d) 36.1%(5-6) Consider assets A and B with expected returns ofE(R)=10% and E(R)=20% and standard deviations of 6%and 8%. The correlation coefficient between A and B equals0.1. You have a total budget of 100000 mu and you want toinvest 10000 mu in stock A and the difference in stock B.[5] The expected return of your portfolio equals:(a) 17% (b) 19% (c) 16% (d) 15%[6] The standard deviation of the portfolio is:(a) 5.63% (b) 7.87% (c) 6.54% (d) 7.28%For applications (7-10) fill in the blanks ......(7) The annual rates of return for a stock is given in the tablebelow:Year1 2 3 4 5Rate of return 5% 7% -4% 2% 9%The five-year holding period return equals...(8) Consider projects A and B with the following forecastednet present values sensitive to the evolution of the economy:Seenario I (p=0.3) II (p=0.7)A (mil. Lei)4B (mil. Lei)26.Use the coefficient of variance to select the preferableproject.CVA=....CVB=......

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For questions (1-6) bold the correct answer or complete with your result if none is correct. (1-2) The expected return on a stock with a current price of 20 lei is 16%. The corporation is expected to deliver a dividend of 1.2 lei per share. [1] The dividend yield expected by the investor equals: (a) 4% (b) 6% (c) 8% (d) 12% [2] The selling price of the stock equals: (a) 22 lei (b) 24 lei (c) 26 lei (d) 30 lei (3-4) The table below presents the cash-flows associated to an investment project: Year Cash-flow-1000 700 800 012 [3] For a cost of capital of 10% the NPV equals: (a) 297.52 (b) 500 (c) 363.64 (d) 388.43 [4] The internal rate of return of the project is: (a) 28% (b) 31.05% (c) 34% (d) 36.1%

For questions (1-6) bold the correct answer or complete with your result if none is correct. (1-2) The expected return on a stock with a current price of 20 lei is 16%. The corporation is expected to deliver a dividend of 1.2 lei per share. [1] The dividend yield expected by the investor equals: (a) 4% (b) 6% (c) 8% (d) 12% [2] The selling price of the stock equals: (a) 22 lei (b) 24 lei (c) 26 lei (d) 30 lei (3-4) The table below presents the cash-flows associated to an investment project: Year Cash-flow-1000 700 800 012 [3] For a cost of capital of 10% the NPV equals: (a) 297.52 (b) 500 (c) 363.64 (d) 388.43 [4] The internal rate of return of the project is: (a) 28% (b) 31.05% (c) 34% (d) 36.1%

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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3.4-3.5 Corporation B's stock is expected to pay a dividend of $5 per share at t=1. Its equity cost of capital is 8%.- 3.4 You conduct a research on Corporation B's business and conclude that its dividend will grow 3% every year in the future. What should be the value of this stock at t=0 based on your conclusion? 3.5 Say the market price of the stock at t=0 is $90. What is the implied dividend growth rate?
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D₁) at the end of the current year will be $1.40. The growth rate (g) is 10 percent and the discount rate () is 14 percent. a. What should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) Price of the stock b. If there is a 5 percent total underwriting spread on the stock, how much will the issuing corporation receive? (Do not round intermediate calculations and round your answer to 2 decimal places.) Net price to the corporation c. If the issuing corporation requires a net price of $33.50 (proceeds to the corporation) and there is a 5 percent underwriting spread, what should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) Necessary public price
The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0 Required: a. If each stock is priced at $165, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? b. Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity.
Summarize and discuss the implications of the findings for the business or potential business transaction. ------- Kassidy's Kabob House has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock's required rate of return? Assume the market is in equilibrium with the required return equal to the expected return. The stock's require rate of return is 10%.
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