Tesla Motors shares were initially offered to investors at $17. Three years later, the price was $90 per share. What was the compound annual return that Tesla investors owned over this period? Given that Tesla paid no dividends and was not expected to start paying dividends anytime soon, what method might ana- lysts have used to value the company's shares in 2013? The company sold 13.3 million shares in its IPO with a par value of $0.001 per share. How much paid- in capital did Tesla record on its balance sheet as a result of the IPO? Do you think that the highly favorable Consumer Reports review of the Model S boosted Tesla's stock primarily because the review reduced the company's risk or because it boosted expected cash flowe

Tesla Motors shares were initially offered to investors at $17. Three years later, the price was $90 per share. What was the compound annual return that Tesla investors owned over this period? Given that Tesla paid no dividends and was not expected to start paying dividends anytime soon, what method might ana- lysts have used to value the company's shares in 2013? The company sold 13.3 million shares in its IPO with a par value of $0.001 per share. How much paid- in capital did Tesla record on its balance sheet as a result of the IPO? Do you think that the highly favorable Consumer Reports review of the Model S boosted Tesla's stock primarily because the review reduced the company's risk or because it boosted expected cash flowe

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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S American Health Systems currently has 7,200,000 shares of stock outstanding and will report earnings of $12 million in the current year. The company is considering the issuance of 1,300,000 additional shares that will net $40 per share to the corporation. a. What is the immediate dilution potential for this new stock issue? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dilution b-1. Assume that American Health Systems can earn 15 percent on the proceeds of the stock issue in time to include them in the current year's results. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.) Earnings per share per share b-2. Should the new issue be undertaken based on earnings per O Yes O No share?
Maynard Steel plans to pay a dividend of $2.82 this year. The company has an expected earnings growth rate of 4.4% per year and an equity cost of capital of 10.4%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $0.95 this year and use the remaining $1.87 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Maynard's share price will be $ (Round to the nearest cent.)
Sandhill Tire Co. just paid an annual dividend of $1.20 on its common shares. If Sandhill is expected to increase its annual dividend by 2.10 percent per year into the foreseeable future and the current price of Sandhill’s common shares is $14.59, what is the cost of common stock for Sandhill?
General Importers announced that it will pay a dividend of $3.65 per share one year from today. After that, the company expects a slowdown in its business and will not pay a dividend for the next 4 years. Then, 6 years from today, the company will begin paying an annual dividend of $1.75 forever. The required return is 11.4 percent. What is the price of the stock today? Multiple Choice O $3.28 $11.31 O $13.24 O $12.22 O $15.35
Margoles Publishing recently completed its IPO. The stock was offered at a price of $14.63 per share. On the first day of trading, the stock closed at $19.37 per share. If Margoles Publishing paid an underwriting spread of 6.6% for its IPO and sold 11 million shares, what was the total cost (exclusive of underpricing) to it of going public? The total cost of going public was $ million. (Round to one decimal place.)
Forral Company has never paid a dividend. But the company plans to start paying dividends in two years-that is, at the end of Year 2. The first dividend is expected to equal $1 per share. The second dividend and every dividend thereafter are expected to grow at a 6 percent rate. If Investors require a 14 percent rate of return to purchase Forral's common stock, what should be the market value of its stock today? Do not round intermediate calculations. Round your answer to the nearest cent. $______.
Decker Incorporated's common stock currently trades at $45/share and recently paid a $3 dividend. The company plans to reduce dividends by a constant 2% rate in order to reinvest in itself for the foreseeable future. All else being equal, what effect with this change have on the value of Decker's common stock? It will increase It will decrease. It will be unaffected by the change. Cannot be determined.
Enterprise Storage Company has 420,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $5.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) Dividend in arrears b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years: D1 D2 D3 D4 $1.05 1.15 1.25 1.35 The company anticipates earnings per share after four years will be $4.07 with a P/E ratio of 14. The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount rate used by the investment banker is 11…
XYZ Inc., has an odd dividend policy. The company has just paid a dividend of $11.00 per share and has announced that it will increase the dividend by $9.00 per share for each of the next four years, and then never pay another dividend. If you require a return of 16 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Maynard Steel plans to pay a dividend of $3.18 this year. The company has an expected earnings growth rate of 4.5% per year and an equity cost of capital of 10.8%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $1.08 this year and use the remaining $2.10 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Maynard's share price will be $. (Round to the nearest cent.)
Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 14 percent on the company's stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price
Enterprise Storage Company has 450,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $8.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) Dividend in arrears b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years: D1 $ 1.20 D2 1.30 D3 1.40 D4 1.50 The company anticipates earnings per share after four years will be $4.10 with a P/E ratio of 11.The common stock will be valued as the present value of future dividends plus the present value of the future stock price…

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