(similar to) Question Help Integrative-Risk and Valuation Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) $46.71 D Current price per share of common stock Expected dividend per share next year Constant annual dividend growth rate $4.91 5.2% Risk-free rate of return 5.8% The risk premium on Foster stock is %. (Round to two decimal places.)

(similar to) Question Help Integrative-Risk and Valuation Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) $46.71 D Current price per share of common stock Expected dividend per share next year Constant annual dividend growth rate $4.91 5.2% Risk-free rate of return 5.8% The risk premium on Foster stock is %. (Round to two decimal places.)

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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Suppose that you have estimated the following model for a broad cross section of stocks: r(t) = 3% + 2*Dividend_yield(t-1) - 1*ln(Market_capitalization(t-1)) + 3*Book/Market(t-1)Company AC's stock currently is priced such that it offers a 3% dividend yield, has a ln(Market Cap) of 1.6, and a book/market ratio of 1. According to your model, what is AC's expected stock price return for next year? Group of answer choices 3.8% 5.8% 6.5% 10.4% 13.6%
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An investor with a required return of 15 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: Firm A B C Current earnings $ 2.40 $ 3.20 $ 7.50 Current dividend $ 0.90 $ 3.80 $ 6.90 Expected annual growth rate in 5 % 1 % -1 % dividends and earnings Current market price $ 16 $ 31 $ 49 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: $ If the investor does buy stock A, what is the implied percentage return? Round your answer to two decimal places. % If the appropriate P/E ratio is 12, 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 4, what is the maximum…
DePaul, Inc. You are searching for a stock to add to your current stock portfolio. You are interested in DePaul, Inc. You realize that any time you consider a technology stock, it involves elevated risk. The rule you follow is to include only stocks with a coefficient of variation of returns below 1.02. You have obtained the following price information and dividend information: Year Starting Price Ending price Quarterly Dividend 1 $40.00 $42.00 $0.50 2 $42.00 $47.40 $0.75 3 $47.40 $43.40 $1.00 4 $43.40 $53.40…
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Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. Current price per share of common stock $47.02 Expected dividend per share next year $2.46 Constant annual dividend growth rate 5.9% Risk-free rate of return 3.9% The risk premium on Foster stock is ___%
Preferred stock valuation Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of $100 and pays an annual dividend of $6.10 per share. Similar-risk preferred stocks are currently earning an annual rate of return of 7.6%. a. What is the market value of the outstanding preferred stock? b. If an investor purchases the preferred stock at the value calculated in part a, how much does she gain or lose per share if she sells the stock when the required return on similar-risk preferred stocks has risen to 8.8%? ... a. The market value of the outstanding preferred stock is $ per share. (Round to the nearest cent.) b. If the required return on similar-risk preferred stocks has risen to 8.8%, the value of the stock will be $ per share. (Round to the nearest cent.) If an investor purchased the preferred stock at the value calculated in part a and sells the stock when the required return on similar-risk preferred stocks has risen to 8.8%,…
A preferred stock is expected to pay a constant quarterly dividend of $1.75 per quarter into the future. The required rate of return, Rs, on the preferred stock is 12.0 percent. What is the fair value (or price) of this stock? Group of answer choices a. $18.65 b. None of the above c. $37.04 d. $24.36 e. $58.33
13. Use the following information on Stock X to find the price of a share of stock using the free-cash flow. Assume the annual growth is 4.0% and the WACC is 7.0%. The financial statements below are on Moodle for Exam 2 in case you want to use those to practice-prepare for this question. Answer: Financial Statements at the end of Year Income Statement Sales COGS Gross Profits Depreciation EBIT Interest End of Year 1 $ 68,000.00 $ 45,800.00 $ 22,200.00 $ 1,000.00 $ 21,200.00 $ 97.50 $ 21,102.50 $ 6,330.75 $ 14,771.75 $ Change in Retained Earnings $ 14,771.75 Income Before Taxes Taxes (30%) Net Income Dividends AAAA Balance Sheet Assets Begin. of Year 1 End of Year 1 Llabilities Begin. of Year 1 End of Year 1 Cash $ Inventories $ Net fixed assets $ 5,000.00 $ 6,000.00 $ 28,000.00 $ 10,571.75 4,200.00 39,000.00 Total Assets $ 39,000.00 $ 53,771.75 Notes payable Long term debt Initial paid in capital $ Retained earnings $ Tot. Llab. & Equity $ 1,950.00 $ 37,050.00 $ $ $ 39,000.00 $…
*Please solve using excel and explain formulas. Question: Here are forecasts for next year for two stocks: Stock A Stock B Return on equity 17 % 14 % Earnings per share $ 3.00 $ 2.50 Dividends per share $ 2.00 $ 2.00 a. What are the dividend payout ratios for each firm? b. What are the expected dividend growth rates for each stock? Assume dividend has a steady growth for both stocks. c. If investors require a return of 17% on each stock, what are their values?
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
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