Problem 10-01West Wind, Inc. has 5,200,000 shares of common stock outstanding with a market value of $70 per share. Net income for the coming year is expected to be $7,000,000. What impact will a two-for-one stock split haveon the earnings per share and on the price of the stock? Round the earnings per share to the nearest cent and the prices of the stock to the nearest dollar.EPS before the split: $EPS after the split: $Price of the stock before the split: $Price of the stock after the split: $per shareper share Problem 11-03An investor with a required return of 12 percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to purchase. The information is as follows:FirmCurrent earningsCurrent dividendExpected annual growth rate individends and earningsCurrent market priceABC$2.30 $3.50 $7.30$1.10 $3.20 $7.40-1%6%b. If the investor does buy stock A, what is the implied percentage return? Round your answer to two decimal places.%1%$24 $ 32$ 32 $ 64a. What is the maximum price that the investor should pay for each stock based on the dividend-growth model? Round your answers to the nearest cent.Stock A: $Stock B: $Stock C: $c. If the appropriate P/E ratio is 11, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent.Stock A: $Stock B: $Stock C: $If the appropriate P/E ratio is 6, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent.Stock A: $Stock B: $Stock C: $

Note : Dear student, since you have asked 2 multiple questions we will solve only one questions as…

Answered: Problem 10-01 West Wind, Inc. has…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Return on Common Stock You buy a share of The Ludwig Corporation stock for $23.70. You expect it to pay dividends of $1.10, $1.1715, and $1.2476 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $28.63 at the end of 3 years. Calculate the growth rate in dividends. Round your answer to two decimal places.   % Calculate the expected dividend yield. Round your answer to two decimal places.   % Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places.   %
Return on Common Stock You buy a share of The Ludwig Corporation stock for $21.00. You expect it to pay dividends of $1.09, $1.1772, and $1.2714 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.45 at the end of 3 years. Calculate the growth rate in dividends. Round your answer to two decimal places.   % Calculate the expected dividend yield. Round your answer to two decimal places.   % Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places.   %
14 -The common stock of Permanent Assurance Corporation currently trades at $40.00 per share, which is approximates its intrinsic value. The company has announced plans to maintain its dividend next year at $1.20 per share. Your research indicates that historically, the firm's dividend payout ratio has averaged 50% while its return on equity averaged 9.0%. The book value of the shares is $25.00 and research shows there is relatively low variation in the firm's operations. You believe the firm's payout ratio and ROE should continue at their historic levels in the future over the long term. Enter your answers on the spreadsheet. Calculate the dividend yield of the firm's shares based on the announced dividend and rounded to 2 decimals:       Dividend Yield:
Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 9 percent indefinitely? a. 15 percent b. 14 percent c. 16 percent d. 13 percent
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eBook Problem 21-02 Sun Instruments expects to issue new stock at $35 a share with estimated flotation costs of 9 percent of the market price. The company currently pays a $2.50 cash dividend and has a 8 percent growth rate. What are the costs of retained earnings and new common stock? Round your answers to two decimal places. Costs of retained earnings: % Cost of new common stock: %
11-10 Radagast Inc. has one-million common shares outstanding, with each share priced at $12. The company’s equity beta is 2. What is the expected return on the company’s shares if the risk-free rate is 3% and the market return is 12%? Select one: a. 5% b. 8% c. 13% d. 21% e. 31%
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Problem 18-9 MF Corp. has an ROE of 14% and a plowback ratio of 75%. The market capitalization rate is 13%. a. If the coming year's earnings are expected to be $2.30 per share, at what price will the stock sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price

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