Radon Homes' current EPS is $6.50. It was $3.65 5 years ago. The company pays out 60% of its earnings asdividends, and the stock sells for $34.a. Calculate the historical growth rate in earnings. (Hint: This is a 5-year growth period.) Do not round intermediatecalculations. Round your answer to two decimal places.%b. Calculate the next expected dividend per share, D1. (Hint: Do =0.60($6.50) = $3.90.) Assume that the pastgrowth rate will continue. Do not round intermediate calculations. Round your answer to the nearest cent.c. What is Radon's cost of equity, rs? Do not round intermediate calculations. Round your answer to two decimalplaces.%

The cost of equity depends on the growth rate and dividend paid by the company and it changes with…

nd the stock sells for $34. the historical growth rate in earnings. (Hint: This is a 5-year growth period.) Do not r ns. Round your answer to two decimal places. % the next expected dividend per share, D1. (Hint: Do = 0.60($6.50) = $3.90.) Assume %3D %3D te will continue. Do not round intermediate calculations. Round your answer to the ne adon's cost of equity, rs? Do not round intermediate calculations. Round your answer

nd the stock sells for $34. the historical growth rate in earnings. (Hint: This is a 5-year growth period.) Do not r ns. Round your answer to two decimal places. % the next expected dividend per share, D1. (Hint: Do = 0.60($6.50) = $3.90.) Assume %3D %3D te will continue. Do not round intermediate calculations. Round your answer to the ne adon's cost of equity, rs? Do not round intermediate calculations. Round your answer

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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Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $5.10 at the end of the first year. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Horizon (years) PV (Dividends) PV (Terminal Price) Value per Share 1 2 3 10
A stock is expected to pay a dividend next year of $2.1. The dividend amount is expected to grow at an annual rate of 6.9% indefinitely. Assuming a required return on the stock of 10.8% in the future, the dividend yield on the stock is %. Margin of error for correct responses: +/- .05 Rounding and Formatting instructions: Do not enter dollar signs, percent signs, commas, X, or any words in your response. Do not round any intermediate work, but round your *final* response to 2 decimal places (example: if your answer is 12.3456, 12.3456%, or $12.3456, you should enter 12.35).
Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 12.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price? Select the correct answer. a. $35.40 b. $38.34 c. $37.36 d. $36.38 e. $34.42
Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place 44. Assume that the current market price of Zigi, Inc. stock is $54.59. If Zigi, Inc. just paid a dividend of $4.57per share (i.e., D0 = 4.57), and if investors expect that the company’s dividends will grow at an annual rate of2.47% forever, then Zigi, Inc.’s required rate of return is ____%. (Record your answer rounded to 1 decimalplace; for example, record 18.29654% as 18.3).45. Phillips, Inc. just paid a dividend of $3.25 per share on its common stock (that is, D0 = 3.25). Investors expectthe dividend to grow at 45% in years 1 and 2, they expect the dividend to grow at 25% in year 3 and theyexpect that all future dividends (that is, dividends in years 4, 5, ..., infinity) to grow at a constant rate of 5%per year. If the cost of capital for Phillips, Inc. stock is 18%, what is the current price of the stock?
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3, and its current price is $100. A. What is its nominal annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places. B. What is its effective annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places.
You purchase 100 shares of stock for $47 a share. The stock pays a $3 per share dividend at year - end. What is the rate of return on your investment for these end-of-year stock prices? What is your real (inflation - adjusted) rate of return? Assume an inflation rate of 4%. (Round your answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.) a) End of year stock price = $43 Real rate of return = ? Real rate= ? b) End of year stock price = $47 Real rate of return= ? Real rate= ? c) End of year stock price = $50 Real rate of return= ? Real rate = ?
Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 20%. Its expected earnings this year are $2 per share. Complete the following table. Note: Leave no cells blank. Enter a zero, wherever necessary. Do not round intermediate calculations. Round growth rate to two decimal places. a. b. C₁ Plowback Ratio 0 0.20 0.60 Growth Rate Stock Price P/E Ratio % % %
Ellington Electronics wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $3.70 per share, and the current price of its common stock is $76 per share. The expected growth rate is 7 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Compute the cost of retained earnings (Ke). Cost of retained earnings % b. If a $7.0 flotation cost is involved, compute the cost of new common stock (Kn). Cost of new common stock %
Find the real rate of return for the Costco stock you purchased for $166.80 five years ago, that has a current price of $382.23, and dividends of $7/per share. The inflation rate is 9.44%. (round to TWO decimal places){WRITE YOUR ANSWER AS A PERCENTAGE…FOR EXAMPLE, WRITE 12.56 FOR 12.56% AND NOT .12563}.
Company Z-prime's earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year's dividend is $9, the cost of equity is 9%, and next year's EPS is $14. What is Z-prime's stock price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Stock price
Please answer questions 3/4 PLEASE ! The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $24.00 per share; its last dividend was $1.80; and it will pay a $1.89 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. 12.88 % If the firm's beta is 1.8, the risk-free rate is 4%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. 22 % If the firm's bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the judgmental risk premium of 4% in your calculations. Round your answer to two decimal places. % 16.96? If you have equal confidence in the inputs used for the three approaches, what is your…
Investors require an 8% rate of return on Levine Company's stock (i.e., rs = 8%). What is its value if the previous dividend was D0 = $3.50 and investors expect dividends to grow at a constant annual rate of (1) -6%, (2) 0%, (3) 4%, or (4) 5%? Do not round intermediate calculations. Round your answers to the nearest cent. (1) $ (2) $ (3) $ (4) $

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