Suppose you know that a company's stock currently sells for $51.48 per share and the requiredreturn on the stock is 6.13 percent. You also know that the total return on the stock is evenly dividedbetween capital gains yield and dividend yield. If it's the company's policy to always maintain aconstant growth rate in its dividends, what is the current dividend per share? Answer to two decimals.

Introduction: Current Stock price 51.48 Required return = 6.13% Capital gain and dividend yield are…

Answered: Suppose you know that a company's stock…

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 a stock had an initial price of $92 per share, paid a dividend of $2.30 per share during the year, and had an ending share price of $75.50. a. Compute the percentage total return. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What was the dividend yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c. What was the capital gains yield? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.132.16. Answer is complete but not entirely correct. a. Percentage total return b. Dividend yield c. Capital gains yield 13.04% 13.04% 14.62%
You find a stock selling for $91.26 that has a dividend yield of 1.6 percent and a PE ratio of 12.0. What is the earnings per share (EPS) for the company?
Suppose a firm is operating in 2 periods. The shareholders are expecting to receive $100,000 economic profits (per share of stock) in period 1 and $120,000 (per share of stock) in period 2. Given the required rate of return is the same in both period, which 0.05 and the real option value is $50,000. What is the current value of a share of stock? (Report your answer with 2 decimal points)
Retained earnings versus new common stock Using the data for a firm shown in the following table, calculate the cost of retained earnings and the cost of new common stock using the constant-growth valuation model. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Current market price per share $52.00 Dividend growth rate 6% a. The cost of retained earnings is %. (Round to two decimal places.) Projected dividend per share next year $2.60 Underpricing per share $1.50 Flotation cost per share $2.25
North Side Corp’s dividends for year 1, year 2, year 3, and expected share price for year 3 are: D1=$1.95, D2=$2.10, D3=$2.18, and P3=$95 respectively. What is the company’s current share price given the required return of 8 percent?
A company expects EPS to be $2.52 next year. The industry average P/E ratio is 23.99 and Enterprise multiple is 7.57. The EBITDA for the company is $22.97 million. What is an estimate of the stock price using the method of comparables for P/E multiples? Round your answer to two (2) decimal places.
The average industry PE ratio for a firm is 17.79. What should the current stock price of this firm be if it has projected earnings of $6.69 per share? Please round your answer to 2 decimal places.
4. Expected dividends as a basis for stock values The following graph shows the value of a stock’s dividends over time. The stock’s current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (D₀) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50D10, D20, D50). Assume that the stock’s required return (rss) is 8.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividend’s Expected Future Value Dividend’s Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the orange…
Using the constant dividend growth model, determine the percentage price change in a share when the required rate of return decreases from 19 to 17 per cent combined with a decrease in the dividend growth rate from 11 to 9 per cent. Select one: A. fall less than 2% B. rise more than 2%. C. rise less than 3% D. fall more than 2%
Are bio technology company stock is currently selling for $48.35 per share. The earnings per share are $4.14 and the dividend is $1.80. A-what is the current yield of stock as a percent round your answer to the nearest 10th of a percent? B-what is the price earnings ratio round your answer to the nearest whole number?
Suppose a stock had an initial price of $56 per share, paid a dividend of $1.60 per share during the year, and had an ending share price of $50. Compute the percentage total return, dividend yield, and capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's price one year from now is expected to be 6% below the current price. If two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return, the two stocks must have the same dividend per share. If a stock's dividend is expected to grow at a constant rate of 6% a year, the stock's dividend yield is 6%. For the constant growth model to hold, a firm's cost of equity (re) needs to be smaller than its constant dividend growth rate (i.e., rs< g). From the constant growth model, if the constant dividend growth rate is equal to zero, a firm's share price is equal to the constant dividend divided by the cost of equity (i.e., g=0).

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