If the earnings per share is Rs 4, dividend pay-out ratio is 40 percent, cost of equity capital is 20 percent and growth rate in the rate of return on investment is 15 percent, then the value of the stock according to the Gordon’s dividend capitalization model is

Q: Assume that a company’s market beta equals 0.8, the risk-free rate is 5%, and the market return…

A: Cost of equity capital is the rate of return provided to the equity shareholders.

Q: WICB’s stock’s intrinsic value is $48.40, the required rate of return is 12.5 percent and the…

A: Calculate WICB's recent dividend: Assumption: Dividend growth rate is in perpetuity Formula to…

Q: The following information is available in respect of a firm: Capitalization Rate : 10% Earnings per…

A: Here, Capitalization Rate  (Ke) is 10% EPS is 50 Rate of Return on Investment (r) is : 12% 8% 10%…

Q: Estimate its cost of common equity, Maxell and Associcates recently hired you. Obtain the following…

A: The question is based on the calculation of share value based on the constant growth dividend…

Q: If cost of equity is 14 percent, Earnings per share is Rs.18, Dividend payout ratio is 40 percent…

A: Growth rate = Retention ratio * return on investment = (1 -  Dividend payout ratio)* return on…

Q: The market price of an equity share with face value of Rs 10 is Rs 35, with ROI of 24% and cost of…

A: P = D/k + {r*(E-D)/k}/k,   where P = market price per share D = dividend per share E = earnings per…

Q: h. Calculate the total return % in each of the following instances: a. Do = $2.00, dividend growth =…

A: Answer Return ={ (Dividend + Capital gain ) / P0}×100

Q: Suppose firm A has just earned BDT 5 per share out of which it retained BDT 3 and paid out the…

A: Given Information : Earning per share = BDT 5 Retained amount per share = BDT 3 Required rate of…

Q: Expected dividend is Rs.5 per share expected to grow at 6% pa. If price of share is Rs.50, what is…

A: Expected dividend = Rs. 5 Growth rate = 6% Share price = Rs. 50

Q: WICB's stock's intrinsic value is $48.40, the required rate of return is 12.5 percent and the…

A: Given information: Intrinsic value of stock is $48.40 Required rate of return is 12.5% Dividend…

Q: 1. If the required rate of return is 5 percent and the stock pays a fixed S5 dividend, its value is…

A: Value of stock = Dividend / Required Rate of return Value of stock = 5 / 5% Value of stock =100…

Q: f the face value of both the shres is same then which investment out of following. is more…

A: To determine which investment is more profitable, we need to calculate the dividend yield for each…

Q: To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have…

A: Information Provided:Dividend( 1) = $1.45Price = $22.50Growth rate = 6.5%

Q: For Company ABC, if stock price P0 = $30; dividend paid at the end of period 1 D1 = $3.00; growth…

A: Required rate of return is the return investor expects from the investment made.

Q: n model holds, wl that the mark ure

A: Given information : EPS  ₹        5.00 ROE 16% Market price  ₹      50.00 DPR 40% Since…

Q: Stock price=?

A: The constant growth model is a method for valuing the share price of a stock. It calculates the…

Q: Do= $0.80, P0= $22.50, gl= 8% continous. Based on the dividen growth model . What is the percent of…

A: (Current dividend)D0=0.80 Current stock price (P0)=22.50 Growth rate (g)=8%

Q: If a company has a current stock price of $45, an EPS of $3/share; EPS growth rate of 10% and the…

A: Cash price refers to the amount of cash i.e. received or paid while purchasing or selling the goods…

Q: What will be the price of a share in year 4, given dividend just paid (Do) as $3, required rate of…

A: P = where ,P = market price of shareD = dividend for current yearg = growth ratek = required rate of…

Q: What is the estimated cost of common equity using the DCF approach given the data below? Price $50…

A: In the given question we need to compute the estimated cost of common equity.

Q: Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity…

A: The process of determining any entity's stock's current worth is recognized as stock valuation.…

Q: Suppose you know a company's stock currently sells for $60 per share and the required return on the…

A: Dividend per share is a financial metric that represents the portion of a company's profits…

Q: You have the following data: D1 = $1.80; PO = $36.00; and g = 3.00% (constant).

A: Dividend discount model:The Dividend Discount Model (DDM) remains the dominant method in equity…

Q: In the context of DDM, a dividend payout ratio equal to 100% implies that the future growth rate of…

A: DDM or dividend discount model is a technique used to predict the price of company’s stock. The fair…

Q: Consider the following for a firm. Its stock price (P0) is at $50, its payout ratio (POR) is 0.4,…

A: Dividend Discount Model would be considered as the model under which the price of the stock is…

Q: 39: Using the following closing prices and dividends compute the CWI (cumulative wealth index), the…

A: To compute the CWI, CPC, and CDY, we need to use the following formulas: CWI(t) = CWI(t-1) * (1 +…

Q: You obtained the following data for Game Corporation: D1= $1.25; P0= $27.50; g = 5.00% (constant);…

A: Here to calculate the cost of equity raise we have to use the formula of cost of equity but in this…

Q: What is the price of a stock with an annual dividend of $30, required return on equity of 10%, and…

A: Stock price = dividend * (1+growth ) / (Required return - growth)

Q: An investor expects a14% return on a $ 50 stock that pays a dividend of  $ 2.50. Was is the implied…

A: Dividend (D) = $2.50 Current price (P0) = $50 Return (r) = 0.14   Capital gain rate = ?

Q: If current price of stock is $25 and you hold it for one year and received dividend of $2.5. You…

A: Dividend yield is a financial ratio that measures the amount of cash dividends paid out to…

Q: Calculate the total return % in each of the following instances: a. Do = $2.00, dividend growth =…

A: Total return = [ D1 + ( P1 - P0 ) ] / P0 * 100

Q: If the earnings per share of the firm is OMR 10 and the market price is  OMR 100 and the growth rate…

A: Formula: cost of  equity share capital = ( Earnings per share / Market price ) + Growth rate

Q: X Ltd. earns Rs. 5 per share is capitalised at a rate of 10% and has a rate of return on investment…

A: According to Walter's Dividend model ,P = whereP = stock price per shareD= Dividend per shareE =…

Q: You purchased a stock for $50, and later sell for $49. You received $2 in dividends. What is your…

A: Given information: Initial Price (P) = $50 Ending Price (P1) = $49 Dividend (D) = $2 Required:…