What will be the value of a preferred stock that is continuously committed to pay a dividend of 3400 USD per year when the market interest rate is accepted as 35%? a) 10000 b) 9000 c) 7000 d) 5500
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
What will be the value of a preferred stock that is continuously committed to pay a dividend of 3400 USD per year when the market interest rate is accepted as 35%?
a) 10000
b) 9000
c) 7000
d) 5500
e) 8000
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The price / earnings ratio of ABC Enterprise's stock has been calculated as 3.5. If the expected earnings per share from this stock for the next year is 12 USD, what is the real value of the stock?
a) 50
b) 30
c) 36
d) 21
e) 42
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It is estimated that entity A will have a net profit of 5.5 USD per share for the next year. The price / earnings ratio data of this stock for the past 4 years are calculated as 1.5, 2.5, 3, 2, respectively. Find the true value of the stock of Entity A based on the data.
a) 6.5
b) 12,375
c) 4,375
d) 10,375
e) 9.5
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