Garage, Inc. is expected to maintain a constant 6% growth rate in its dividends, indefinitely. If thecompany has a dividend yield of 5.0%, what is the required return on the company's stock?O 11.00%O 11.53%O 11.3%11.33%O 11.8%

Dividend yield = Dividend payment (expected to be paid next year) / Current stock value = D1 / Po…

Answered: Garage, Inc. is expected to maintain a…

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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Choi Tech stock currently sells for $64 per share and the required return is 12 percent. The total return is evenly divided between the capital gains yield and the dividend yield. What is the current dividend per share if it's the company's policy to always maintain a constant growth rate in its dividends? What are the inputs to solve this on a BA II plus financial calculator?
HighGrowth Company has a stock price of $21. The firm will pay a dividend next year of $1.01, and its dividend is expected to grow at a rate of 3.6% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is %. (Round to one decimal place.)
Stability Corporation’s dividend is expected to be $1.60 next year. Its current stock price is $40 per share. The company is a constant growth firm. If investors require a return of 12 percent on this stock, what do they think Stability’s growth rate will be?
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Jackson Co. just paid a $10.18 dividend. The company's dividends are expected to grow at a consistent rate of 6% indefinitely. Given a required rate of return of 12%, what should be the price of Jackson's stock?
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Firm is maintaining a 5% growth rate in its dividends indefinitely. If the company has a dividends yield of 6.8% what is the required return on the company stock?
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Mill Co. is expected to pay a dividend of $6 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 6.7% forever. If the current price of the stock is $55 per share calculate the expected return or the cost of equity capital for the firm.
Dollar Tree Inc (DLTR) is expected to pay a $1.85 dividend, and it is expected to grow at 9.85% for the next 3 years. After 3 years the dividend is expected to grow at the rate of 5.15% indefinitely. If the required return is 8.15%, what is DLTR's stock value today?

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Garage, Inc. is expected to maintain a constant 6% growth rate in its dividends, indefinitely. If the company has a dividend yield of 5.0%, what is the required return on the company's stock?