Ms. Manners Catering (MMC) has paid a constant $1.50 per sharedividend to its common stockholders for the past 25 years. MMCexpects to continue this policy for the next two years, and then bealinto increase the dividend at a constant rate equal to 2 percent peryear into perpetuity. Investors require a 12 percent rate of return topurchase MMC's common stock What is the market value of MMC'scommon stock$1473$1500$11.54$1530

given, r=12% g=2% dividend = $1.50 for two years D1=D2=$1.5

Answered: Ms. Manners Catering (MMC) has paid 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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Sooner-than-Later (STL) Inc. announces that it will pay a $75 per dividend next year, followed by a final dividend of $30 per share in the year after. Mrs. Donna Holder has 50 shares in STL Inc. She wishes to limit her income from investments limited to $35 in the first year. Demonstrate through relevant computations, how she can achieve this goal through homemade dividends if the required return on STL Inc’s shares is 9%. What will be Mrs. Holder’s earning in the second year?
You own 300 shares of Finance Inc’s preferred stock which currently sells for $30.00 per share and pays annual dividends of $2.00 per share. i. What is the expected return? ii. If you require a 10% return, given the current price, should you sell or buy more stock
Seattle Adventures, Incorporated, is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million, 6% note. b. Issue 1 million shares of common stock for $17 per share with expected annual dividends of $1.02 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share?
McKerley Corporation has preferred stock outstanding that will pay an annual dividend of $3.25 per share with the first dividend exactly 11 years from today. If the required return is 3.51 percent, what is the current price of the stock?
Lohn Corporation is expected to pay the following dividends over the next four years: $12, $9, $6, and $5. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 15 percent, what is the current share price? Multiple Choice $59.45 $63.32 $55.36 $54.83 $5771
es Lohn Corporation is expected to pay the following dividends over the next four years: $12, $9, $8, and $4. Afterward, the company pledges to maintain a constant 8 percent growth rate in dividends forever. If the required return on the stock is 14 percent, what is the current share price? Multiple Choice O O O $65.98 $72.61 $69.88 $67.85
McKerley Corporation has preferred stock outstanding that will pay an annual dividend of $3.10 per share with the first dividend exactly 10 years from today. If the required retum is 3.48 percent, what is the current price of the stock? Mutiple Choice A).$6115 B).$65.47 C).$8608 D).$8908 E).$63.27
Sleeping Bear Travel, Incorporated, is trying to decide between the following two alternatives to finance its new $24 million gaming center: Issue $24 million, 5% note. Issue 1 million shares of common stock for $24 per share with expected annual dividends of $1.20 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note?(b) By how much are dividend payments higher by issuing stock?(c) Which alternative results in higher earnings per share?
What price would you be willing to pay to purchase 1 share of this stock? (Picture )
In you cash account, you buy 100 shares of XYZ Corporation at a price of $10 per share. Two months later, XYZ pays a dividend $0.21 per share. You sell all 100 shares of XYZ three months later at a price of $12 per share. What is your capital gain on this trade?
Micro’s irredeemable preference shares are selling for $82.50 each and pay $3.25 in dividends every six months. What is your effective annual expected rate of return if these securities are purchased at the market value?
ABC company has a dividend payout ratio of 40% and has maintained this payout ratio for several years. The current dividend per share of the company is 60p per share, and it expects that its next dividend per share, payable in one year’s time, will be 65p per share.The capital structure of the company is as follows(image attached).Bond A will be redeemed at nominal value in ten years’ time and pays annual interest of 10%. The cost of debt of this bond is 11.5% per year. The current ex-interest market price of the bond is £96.02. Bond B will be redeemed at nominal value in four years’ time and pays annual interest of 7%. The cost of debt of this bond is 7.5% per year. The current ex-interest market price of the bond is £105.04. ABC has a cost of equity of 15%. Ignore taxation.Calculate the following: 1. Ex-dividend share price, using the dividend growth model. 2. Capital gearing (debt divided by debt plus equity) using market value. 3. Market value weighted average cost of capital.…

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