Tyler Enterprises's stock is currently selling for $45.56 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts projectthe firm's growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what isTyler's cost of internal equity?O 12.43%15.54%O 11.81%13.05%Estimating growth ratesIt is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach.In general, there are three available methods to generate such an estimate:• Carry forward a historical realized growth rate, and apply it to the future.• Locate and apply an expected future growth rate prepared and published by security analysts.• Use the retention growth model.Suppose Tyler is currently distributing 70% of its earnings in the form of cash dividends. It has also historically generated an average return on equity(ROE) of 8%. Tyler's estimated growth rate is%.

Cost of equity refers to the return that is earned by investing in the company as per the holdings…

Tyler Enterprises's stock is currently selling for $45.56 per share, and the firm expects its per-share dividend to be $2.35 in one year. Ana the firm's growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approac Tyler's cost of internal equity? O 12.43% O 15.54% 11.81% 13.05% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or In general, there are three available methods to generate such an estimate:

Tyler Enterprises's stock is currently selling for $45.56 per share, and the firm expects its per-share dividend to be $2.35 in one year. Ana the firm's growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approac Tyler's cost of internal equity? O 12.43% O 15.54% 11.81% 13.05% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or In general, there are three available methods to generate such an estimate:

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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Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 9 percent indefinitely? a. 15 percent b. 14 percent c. 16 percent d. 13 percent
Assume that you are a consultant to Broske Inc., and you have been provided with the following data: the next expected dividend is $0.67; the current market price is $42.50 and the constant growth rate for the dividends is 8.00% Based on the information given what is the cost of equity?
Cullumber Wok Co. is expected to pay a dividend of $1.70 one year from today on its common shares. That dividend is expected to increase by 5.00 percent every year thereafter. If the price of Cullumber common stock is $17.00, what is the cost of its common equity capital? - Cost of common equity =?%
The following financial information is available on Rawls Manufacturing Company: Current per share market price $48.00 Current per share dividend $3.50 Current per share earnings $6.00 Beta 1.1 Expected rate of return on market 12.0% Risk-free rate 6.0% Expected long-term growth rate 5.0% Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute the answer to the nearest 0.1%.) a 12.6% b. 14.4% c.13.4% d.12.7%
Example: Stock Valuation Consider the following information for the company Fledgling Electronics: Expected earnings per share at the end of year $8.33 Expected dividend per share at the end of year $5 Market capitalization rate (r) 15% Expected growth rate dividends (per year) 10% 1. Calculate the current price per share of Fledgling Electronics 2. Calculate the capitalized value of Fledgling's EPS if it had a no growth policy 3. Calculate the present value of Fledgling's growth opportunities
Credenza Industries is expected to pay a dividend of $1.50 at the end of the coming year. It is expected to sell for $61 at the end of the year. If its equity cost of capital is 9%, what is the expected capital gain from the sale of this stock at the end of the coming year? .... O A. $57.34 O B. $5.04 OC. $55.96 O D. $3.66 ..
Kirby Enterprises’s stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project the firm’s growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Kirby’s cost of internal equity? 14.51% 13.78% 18.14% 19.59% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three available methods to generate such an estimate: • Carry forward a historical realized growth rate, and apply it to the future. • Locate and apply an expected future growth rate prepared and published by security analysts. • Use the retention growth model. Suppose Kirby is currently distributing 75% of its earnings in the form of cash dividends. It has also historically…
The 5-year average P/E ratio for a firm is 20.00. This year 's earning per share is $5.00 and it is expected to at a constant growth rate of 6%. What is the projected stock price for the next year? А. S4 В. $104 C. S80.25 D. $94.33 E. $106
The Drogon Company just issued a dividend of $2.36 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $30 a share, what is the company's cost of equity? Multiple Choice 8.43% 13.26% 13.92% 12.6% 12.87%
The future earnings, dividends, and common stock price ofCallahan Technologies Inc. are expected to grow 6% per year. Callahan’s common stockcurrently sells for $22.00 per share, its last dividend was $2.00, and it will pay a $2.12 dividendat the end of the current year.a. Using the DCF approach, what is its cost of common equity?b. If the firm’s beta is 1.2, the risk-free rate is 6%, and the average return on the market is13%, what will be the firm’s cost of common equity using the CAPM approach?c. If the firm’s bonds earn a return of 11%, based on the bond-yield-plus-risk-premiumapproach, what will be rs? Use the midpoint of the risk premium range discussed inSection 10-5 in your calculations.d. If you have equal confidence in the inputs used for the three approaches, what is yourestimate of Callahan’s cost of common equity?
The common stock of Kute & Kuddly Kids Clothes, Inc.currently sells for $88.50 and its current (Do) dividend is $1.10. Determine the implied growth rate for Kute assuming that an investor's required rate of return is 14% and that earnings and dividends are expected to grow at a constant rate. A)13.9% B)12.3% C)13.8% D)12.6%
An analyst has gathered the following information for a Company: Expected earnings per share $9.31 Expected dividends per share $1.96 Expected dividend growth rate 2.00% Required rate of return 5.00% Based on the information provided, the price/earnings ratio of this company is closest to: O A. 33.33 B. 7.02 O C. 20.00

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