The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year.Required:a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price beaccording to the DDM?Note: Round your answer to 2 decimal places.b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities?Note: Do not round intermediate calculations. Round your answer to 2 decimal places.c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the marketcapitalization rate)?Note: Do not round intermediate calculations. Round your answer to 2 decimal places.a. Current stock priceb. Value of ROEc. Amount%per share

a.The current stock price of FI Corporation can be determined using the Dividend Discount Model…

Answered: The Fl Corporation's dividends per…

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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The next dividend payment by Im, Incorporated, will be $2.75 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. Assume the stock currently sells for $49.10 per share. What is 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. What is the expected capital gains yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
HighGrowth Company has a stock price of $20. The firm will pay a dividend next year of $1.03, and its dividend is expected to grow at a rate of 3.6% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is __ % ? (Round to one decimal place.)
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Boehm Incorporated is expected to pay a $2.20 per share dividend at the end of this year (i.e., D1 = $2.20). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 17%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.
EMKA corporation is going to pay a dividend of $1.5, $2, and $2.5 each year for the next three years. Afterwards, it is planing to increas the dividends at a constant rate of 10% indifinitely. How much should the stock be sold for if the required rate of return is 12%? Select one: a.$104.17 b.$102.59 c.$100.01 d.$105.64
Consider the stock of Davidson Company that will pay an annual dividend of 2 in the coming year. The dividend is wxpected to grow at a constant rate of 5 percent permanently. The market requires a 12-percent return on the company. What is the current price of share of the stock?
Whizcom Inc. is expected to pay a dividend of $1 next period. Dividends are expected to grow at 2% per year and the investors require a return of 12%. a) What would be the likely stock price in year 5? b) What would be per annum rate of return implied by a change in prices from time 0 to time 5?
You are considering purchasing stock in a company that is expected to pay a $ 3.34 dividend later this year and you require a return of 7.79%. Assume the dividend will continue to be paid each year thereafter and will grow every year as described below. C What is the maximum price you would be willing to pay if you expect a growth rate of 2%? $ 58.84 (Enter as a whole number with two decimal places, such as 10.19.) What is the maximum price you would be willing to pay if you expect a growth rate of 5%? $ 125.70 What is the maximum price you would be willing to pay if you expect a growth rate of 7%? $452.38 What is the relationship between the price of a stock and the firm's growth rate? O A. The stock price is exactly equal to the growth rate times the dividend. B. As the growth rate investors expect increases, the price they are willing to pay also increases. OC. As the growth rate investors expect increases, the price they are willing to pay decreases. O D. There is no relationship.
Boehm Incorporated is expected to pay a $3.30 per share dividend at the end of this year (i.e., D1 = $3.30). The dividend is expected to grow at a constant rate of 5% a year. The required rate of return on the stock, rs, is 15%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.
A share of stock pays a constantly growing (end-of-the-year) dividend. If the stock sells for $84.77/share today, the dividend to be paid in exactly one year (at t=1) is $9.09, and the total return required by investors (in the stock) is 15.73%, at what price should each share sell in exactly 6 years (at t=6)? (Answer to the nearest $0.01)
Boehm Incorporated is expected to pay a $2.70 per share dividend at the end of this year (i.e., D1 = $2.70). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 16%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.

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