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The HP Corporation has reported the BV of common equity of $9 billion at the end of 2020, with 450 million shares outstanding. The required
a. overvalued
b. undervalued
c. not enough information
d. trading at par value
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Solved in 3 steps
- (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $33. Dividends of $3.11 per share were paid last year, return on equity is 34 percent, and its retention rate is 27 percent. a. What is the value of the stock to you, given a required rate of return of 18 percent? b. Should you purchase this stock? a. Given a required rate of return of 18 percent, the value of the stock to you is $ www (Round to the nearest cent.) Only typed answerAn 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…Jarett & Sons's common stock currently trades at $34.00 a share. It is expected to pay an annual dividend of $2.75 a share at the end of the year (D1 = $2.75), and the constant growth rate is 7% a year. If the company issued new stock, it would incur a 8% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. %
- The Dell Corporation has reported the BV of common equity of $10 billion at the end of 2020, with 400 million shares outstanding. The required rate of return is 5%. The company trades in the stock market for $30. calculate the price-to-book ratio.Suppose Wacken, Limited, just issued a dividend of $1.93 per share on its common stock. The company paid dividends of $1.60, $1.68, $1.75, and $1.86 per share in the last four years. a. If the stock currently sells for $50, what is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. What if you use the geometric average growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity b. Cost of equity % %The current stock price of National Co. is P89. The current dividend for National Co. is P2.50, and dividends are expected to grow at a constant rate of 8%. The implied required return for National Co. is closest to
- IRQ has common stock outstanding, which is trading at $25 per share. IRQ paid a dividend yesterday of $2.22 per share. The dividends are expected to grow at 3%. Their beta is 1.32 The current risk-rate is 3.24% The market risk premium is 6.75% What is the estimate of the cost of common equity (retained earnings)?Your company had net income of $82,500 for the year just ended. Dividends of $35,250 were paid on the company's beginning equity of $907,500. If the company has 62,000 common shares outstanding with a current market price of $7.50 per share, what is the required rate of return on the shares assuming a constant sustainable growth rate of dividends? Options 13.18% 13.51% 13.84% 14.17% 14.50%Q8
- If Big Amp, Inc. stock closed at OMR36 and the current quarterly dividend is OMRO.75 per share, what dividend yield would be reported for the stock in The Wall Street JournalRShamas Famous Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Shamas’ common stock is selling for $18.50 per share, and issuance costs are $3.50 per share. What is Shamas cost of external equity? 12.11% 20.59% 10.00% 14.00%Driver Products recently paid its annual dividend of $2, and reported an ROE of 15%. The firm pays out 50% of its earnings as dividends. The stock has a beta of 1.44. The current risk-free rate is 2.5% and the market return is 11%. Assuming that CAPM holds, what is the intrinsic value of this stock?
