the end of this year and a. If Roybus has 30 million shares outstanding and a weighted average cost of capital of 12.3%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.) b. Would you expect to be able to sell Roybus stock on hearing this announcement and make a profit? Explain.

the end of this year and a. If Roybus has 30 million shares outstanding and a weighted average cost of capital of 12.3%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.) b. Would you expect to be able to sell Roybus stock on hearing this announcement and make a profit? Explain.

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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Similar questions

An investor purchased a stock one year ago for $82.00. It paid an annual cash dividend of $6.21 and is now worth $93.84. What total return did the investor earn? Would the investor have experienced a capital gain? Explain. The investor would experience a capital gain in the amount of $11.8411.84. The total return earned by the investor is $enter your response here. The total percentage return by the investor 22.0722.07%.
Summarize and discuss the implications of the findings for the business or potential business transaction. ------- Kassidy's Kabob House has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock's required rate of return? Assume the market is in equilibrium with the required return equal to the expected return. The stock's require rate of return is 10%.
Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar- weighted return on your investment is Answers: А. -1.75%. B. 8.00%. C. 4.08%. D. 8.53%. Е. 12.35%.
The FI Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) Amount % per share
You just purchased a share of SPCC for $101.You expect to receive a dividend of $6 in one year. If you expect the price after the dividend is paid to be $115, what total return will you have earned over the year? What was your dividend yield? Your capital gain rate? _____________________%.(Round to two decimal places.)
Assume Evco, Inc. has a current stock price of $48.64 and will pay a $2.25 dividend in one year; its equity cost of capital is 10%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? We can expect Evco stock to sell for $. (Round to the nearest cent.)
Suppose you purchase one share of the stock of Cereal Correlation Company at the beginning of year 1 for $35. At the end of year 1, you receive a $3 dividend, and buy one more share for $44. At the end of year 2, you receive total dividends of $6 (i.e., $3 for each share), and sell the shares for $50 each. The time-weighted return on your investment is? When performing the calculations, do not round any inputs or interim results until you get the final answer. Round your final answer to four places after the decimal point. The dollar-weighted return on your investment is? When performing the calculations, do not round any inputs or interim results until you get the final answer. Round your final answer to four places after the decimal point.
Vijay
(Calculating rates of return) Blaxo Balloons manufactures and distributes birthday balloons. At the beginning of the year Blaxo's common stock was selling for $17.95 but by year end it was only $16.91. If the firm paid a total cash dividend of $1.76 during the year, what rate of return would you have earned if you had purchased the stock exactly one year ago? What would your rate of return have been if the firm had paid no cash dividend? The rate of return you would have earned is %. (Round to two decimal places.)
Anderson Motors, Inc. has just set the company dividend policy at $0.60 per year. The company plans to be in business forever. What is the price of this stock if a. an investor wants a return of 4%? b. an investor wants a return of 7%? c. an investor wants a return of 10%? d. an investor wants a return of 11%? e. an investor wants a return of 17%?
Assume you are a financial planner seeking to earn some dividend income for a client, and thus need to understand the value of a $50,000 investment in a stock, ABC, which will pay an annual dividend in the amount of $.06 per dollar invested. Meaning, a $50,000 investment in this company will equate to $3,000 per year in dividend income. Assuming that all dividend income can be reinvested and earn 4% annually in interest, and your client would like to cash out the dividend income in 4 years, what is the future value of this stream of dividend payments? O $12,000.00 $12.459.64 O $13,248.97 O $16.248.97
Assume Evco, Inc. has a current stock price of $50.92 and will pay a $2.20 dividend in one year; its equity cost of capital is 18%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? We can expect Evco stock to sell for $_____. (Round to the nearest cent.)

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