Financial Accounting The current market price of ABCD's stock is $30 per share. ABCD justpaid a $2 dividend and its dividend is expected to grow by 5% in thecoming year. The required rate of return for ABCD is 15%. What isABCD's dividend yield and its capital gains yield?a. 6.7%; 8.3%b. 8%; 7%c. 5%; 10%d. 7%; 8%e. 10%; 5%

Given:Current market price (P0) = $30Dividend just paid (D0) = $2Dividend growth rate (g) = 5% (or…

Answered: The current market price of ABCD's…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 10P

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Similar questions

Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million? In general terms, how would a change in investment opportunities affect the payout ratio under the residual distribution policy? What are the advantages and disadvantages of the residual policy? (Hint: Don’t neglect signaling and clientele effects.)
Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?
The current market price of ABCD's stock is $30 per share. ABCD just paid a $2 dividend and its dividend is expected to grow by 5% in the coming year. The required rate of return for ABCD is 15%. What is ABCD's dividend yield and its capital gains yield? a. 6.7%; 8.3% b. 8%; 7% c. 5%; 10% d. 7%; 8% e. 10%; 5%
XYZ Co. will pay a $3.20 per share dividend at the end of the year. The dividend growth rate = 8.5% per year Stock Price = $62.20 What is the required rate of return?
Lucus Laboratories' last dividend was $1.50. Its current equilibriuem stock price is $15.75 and is expected to grow at a constant 5 percent. If the stockholders' required rate of return is 15 percent, what is the expected dividend yield and expected capital gains yield for the coming year? Select one: a. Expected dividend yield 15%; Expected capital gains yield 0% b. Expected divided yield 10%; Expected capital gains yield 5% c. Expected dividend yields 5%: Expected capital gains yield 10% d. Expected dividend yield 10%; Expected capital gains yield 15%
Albright Motors is expected to pay a year- end dividend of $3.00 a share (D1 = $3.00). The stock currently sells for $30 a share. The required (and expected) rate of return on the stock is 16 percent. If the dividend is expected to grow at a constant rate, g, what is g? a. 7.00% b. 13.00% C. 10.05% d. 5.33% e. 6.00%
Gray Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $27.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? a. 5.95% b. 5.54% O c. 6.01% O d. 6.91% O e. 6.07%
Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? a. 6.01% b. 6.17% c. 6.33% d. 6.49% e. 6.65%
Wise Corp. is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? * 6.65% 6.49% 6.17% 6.01% 6.33%
NTT Corp is expected to pay a $2.80 annual dividend to its common shareholders next year. Analysts expect these dividends to grow indefinitely at a 6.5 percent annual rate. If the required rate of return on the common stock is 10.8 percent, what is the intrinsic value of the common stock? a. $56.28 b. $61.44 c. $65.12 d. $69.35
A stock price is expected to pay a year-end dividend of 2.00$. The dividend is expected to decline at a rate of 5% a year forever (g=-5.00%). If the company is in equilibrium and its expected and required rate of return is 15%. Which of the following statement is correct? a. The company's current stock price is 10$ b.The company's expected capital gains yield is 5% c. The constant growth model cannot be used because the growth rate is negative. d. The company's expected stock price at the beginning of next year is 19$ e.The company's divident yield 5 years from now is expected to be 10%

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