The newspaper reported last week that Bennington Enterprises earned $34.09 millionthis year. The report also stated that the firm's return on equity is 18 percent. The firmretains 70 percent of its earnings.What is the firm's earnings growth rate? (Do not round intermediate calculations andenter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)What will next year's earnings be? (Do not round intermediate calculations and enteryour answer in dollars, 'not millions of dollars, rounded to the nearest whole number,e.g., 1,234,567.)Earnings growth rateNext year's earnings%

Earning growth rate can be calculated by multiplying the ROE with retention ratio. Earning growth…

Answered: The newspaper reported last week that…

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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Jarett & Sons's common stock currently trades at $39.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D1 = $3.00), and the constant growth rate is 6% a year. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. %___ If the company issued new stock, it would incur a 10% 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 future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 7% per year. Callahan's common stock currently sells for $25.25 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 2.0, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost…
A firm is expected to pay a dividend of $2.35 next year and $2.50 the following year. Financial analysts believe the stock will be at their price target of $90 in two years. Compute the value of this stock with a required return of 12.3 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Jarett & Sons's common stock currently trades at $22.00 a share. It is expected to pay an annual dividend of $2.25 a share at the end of the year (D1 = $2.25), and the constant growth rate is 4% a year. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. % If the company issued new stock, it would incur an 11% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. %
Jarett & Sons' common stock currently trades at $34.00 a share. It is expected to pay an annual dividend of $1.75 a share at the end of the year (D1 = $1.75), and the constant growth rate is 3% a year. a. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the company issued new stock, it would incur a 9% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. %
(Measuring growth) Thomas, Inc.'s return on equity is 13 percent and management has plans to retain 23 percent of earnings for investment in the company. a. What will be the company's growth rate? b. How would the growth rate change if management (i) increased retained earnings to 35 percent or (ii) decreased retention to 11 percent? a. The company's growth rate will be %. (Round to two decimal places.)
A firm's earnings and dividends are expected to decline at a constant rate of 3% per year. The most recent dividend (Div0) was $3.8 and the required return on the stock is 14%. The current price of the stock should be $__________. Do not round any intermediate work, but round your final answer to 2 decimal places (ex: 12.34567 should be entered as 12.35).
Gilmore, Inc., had equity of $160,000 at the beginning of the year. At the end of the year, the company had total assets of $315,000. During the year, the company sold no new equity. Net income for the year was $34,000 and dividends were $4,400. What is the sustainable growth rate for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the sustainable growth rate if you use the formula ROE x b and beginning of period equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the sustainable growth rate if you use end of period equity in this formula? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. C. Answer is complete but not entirely correct. 12.46 8 % Sustainable growth rate ROE x b (using beginning of period equity) ROE x b (using end of period…
For the year ended December 31, 2022, Settles Incorporated earned an ROI of 10.5%. Sales for the year were $9 million, and average asset turnover was 2.1. Average stockholders' equity was $2.8 million. Required: Calculate Settles Incorporated's margin and net income. Note: Round "Margin" answer to 1 decimal place. Enter the net income answer in dollars, i.e., $5 million should be entered as 5,000,000. Calculate Settles Incorporated's return on equity. Note: Round your answer to 1 decimal place.
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $28.25 per share; its last dividend was $1.60; and it will pay a $1.68 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.____% If the firm's beta is 1.8, the risk-free rate is 5%, and the average return on the market is 12%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places.____% If the firm's bonds earn a return of 9%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places.____% If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of…
Heavy Rain Corporation just paid a dividend of $3.72 per share, and the firm is expected to experience constant growth of 5.18% over the foreseeable future. The common stock is currently selling for $60.89 per share. What is Heavy Rain's cost of retained earnings using the Gordon Model (DDM) approach? Round the answers to two decimal places in percentage form. (Write the percentage sign in the "units" box) Your Answer: Answer units
Forward Inc. just reported annual earnings of $1 per share this year. The firm's ROE is 0.10% and its earnings retention ratio is 0.6%. If the firm's market capitalization rate (Rs) is 15%, How much is the P/E ratio (P0/E1)?

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