Keep the Highest/2 f new common stock represent the fees that firms pay to investment bankers to help them issue new common stock. anufacturing Company has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of e company's earnings and dividends growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If pects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new (rounded to two decimal places) should be Grade It Now Save & Continue Continue without saving

Keep the Highest/2 f new common stock represent the fees that firms pay to investment bankers to help them issue new common stock. anufacturing Company has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of e company's earnings and dividends growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If pects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new (rounded to two decimal places) should be Grade It Now Save & Continue Continue without saving

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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Detroit irons last dividend was$3.00. the company's growth is expected to remain at a constant 5 percent for the foreseeable future. if investors demand a 13 percent return what is the firm's current stock price? Show formula and work. A.52.50 B.45.00 C.42.86 D.39.38 E.37.50
Growth Company's current share price is $20.30 and it is expected to pay a $0.90 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.4% per year. a. What is an estimate of Growth Company's cost of equity? b. Growth Company also has preferred stock outstanding that pays a $2.25 per share fixed dividend. If this stock is currently priced at $28.25, what is Growth Company's cost of preferred stock? c. Growth Company has existing debt issued three years ago with a coupon rate of 6.1%. The firm just issued new debt at par with a coupon rate of 6.6%. What is Growth Company's cost of debt? d. Growth Company has 5.5 million common shares outstanding and 1.4 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.5 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company's assets? e. Growth…
Maynard Steel plans to pay a dividend of $2.82 this year. The company has an expected earnings growth rate of 4.4% per year and an equity cost of capital of 10.4%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $0.95 this year and use the remaining $1.87 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Maynard's share price will be $ (Round to the nearest cent.)
Start-Up Industries is a new firm that has raised $400 million by selling shares of stock Management plans to earn a 20% rate of return on equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm. B. What will be Start-Up's ratio of market value to book value? Note: Do not round intermediate calculations. Market-to-book ratio b. What will be Start-Up's ratio of market value to book value if the firm can earn only a rate of return of 8% on its investments? Note: Do not round intermediate calculations. Round your answer to 1 decimal place. Market-to-book ratio
A company is expected to pay out 40% of its expected earnings per share of €0.5 next year as dividends. The earnings are expected to grow 2% per year in perpetuity and the cost of equity is 7%. Supposing that the company is a stable growth dividend paying, calculate the expected PE ratio. P/E=Payout ratio*(1+g)/(r-g) A. 4 B. 8 C. 10 D. 20 E. 25
Trusty gets’ Lucky Ltd., just paid a dividend of $2.00 per share. The managingdirector just announced that it is planned to increase dividends at a rate of 6% indefinitely. An appropriate discount rate for this company is 16% per annum. i. What is the firm’s expected dividend stream over the next 3 years?ii. What is the firm’s current stock price?iii. What is the firm’s expected value in one year?iv. What are the expected dividend yield, capital gains yield and total return during thefirst year?
IBM expects to pay a dividend of $4 next year and expects these dividends to grow at 7% a year. The price of IBM is $90 per share. What is IBM's cost of equity capital? A. 9.65% B. 10.23% C. 12.36% D. 11.44% E. 10.89%
Please show work in Excel.
Shamas Famous Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Shamas’ common stock is selling for $18.50 per share, and issuance costs are $3.50 per share. What is Shamas cost of external equity? 12.11% 20.59% 10.00% 14.00%
The common stock of Barr Labs Inc., trades for $122per share. Investors expect the company to pay a(n)$1.33 dividend next year, and they expect that dividend to grow at a constant rate forever. If investors require a(n) 15.5% return on this stock, what is the dividend growth rate that they are anticipating? _______________________________________________________________________ The anticipated dividend growth rate is ________%. (Round to two decimal places.)
Gillette Corporation will pay an annual dividend of $ 0.63 one year from now. Analysts expect this dividend to grow at 1 1.1 % per year thereafter until the 6th year. Thereafter, growth will level off at 1.6 % per year. According to the dividend- discount model, what is the value of a Gillette share if the firm's equity cost of capital is 8.4 %? Question content area bottom Part 1 The value of a Gillette share is $ enter your response here. (Round to the nearest cent.)
Barton Industries expects next year's annual dividend, D1, to be $2.30 and it expects dividends to grow at a constant rate g = 4.9%. The firm's current common stock price, P0, is $25.00. If it needs to issue new common stock, the firm will encounter a 4.5% flotation cost, F. What is the flotation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. _____% What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places. _____%

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