What would be the approximate expected price of a stock when dividends are expected to grow at a 26% rate in each of years 2 and 3, and then gat a constant rate of 8% if the stock's required return is 16% and next year's dividend will be $4.80?Multiple Choice$78.35О$72.86$79.42О$87.24

Step 1: The calculation of the expected price of stock ABCD1YearDividendTerminal valuePresent…

Answered: What would be the approximate expected…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose you invest in 230 shares of Johnson and Johnson at $70 per share and 240 shares of Yahoo at $20 per share. If the price of Johnson and Johnson increases to $80 and the price of Yahoo decreases to $18 per share, what is the return on your portfolio? O A. 13.06% В. 9.58% С. 10.45% D. 8.71%
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Select the best Question 24 Reddick Enterprises' stock currently sells for $35.50 per share. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock (I/Yr) is 9.00%. What is the stock's expected dividend in 3 years (Div3)? O 146 O 224 O 1.76 O 2.00 O 1.24
What is the most you should be willing to pay for the stock in the table? Expected Expected Price in 1Dividend in 1 year Required Current Return Price Year $376.29 $3.91 5.80% $89.00
QUESTION 4 What is the expected annual return for a stock that is priced at $64.78, is expected to pay a dividend of $2.00 every quarter forever, and is expected to pay its next dividend in 3 months? O 12.35% (plus or minus 2 bps) O3.09% (plus or minus 2 bps) O 12.93% (plus or minus 2 bps) O6.17% (plus or minus 2 bps) O the answer cannot be obtained based on the given information
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You are considering purchasing a share of preferred stock with the following characteristics: par value = $100 dividend rate = 12% per year payment schedule = quarterly maturity date = required rate of return = 6% per year current market price = $135 per share Based on this information, answer the following: A. What is the dollar amount of the quarterly dividend on this stock? B. Using the Discounted Cash Flow Method, what is the dollar value of this stock? C. Using the Discounted Cash Flow Method, what is the annual expected return for this stock? D. Based on your answer to part B, should you invest in the stock? Why or why not? E.…
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AT&T stock has the following probability distribution of expected prices one year from now: State Probability Price 1. 20% $ 15 2. 30% $ 22 3. 50% $ 31 If you buy AT&T today for $19 and it will pay a dividend during the year of $0.8 per share, what is your expected holding-period return on AT&T?
EXCEL PROJECT AND EXCEL SOLUTION Consider the following stocks, all of which will pay a liquidating dividend in a year and nothing in the interim: Stock A Stock B Stock с Stock D Market Capitalization (5 million) 800 750 950 900 Expected Liquidating Dividend ($ million) 1000 1000 1000 1000 Beta PLEASE SHOW SOLUTIONS IN EXCEL 0.77 1.46 1.25 1.07 a. Calculate the expected return of each stock. b. What is the sign of correlation between the expected return and market capitalization of the stocks? In Problem 20, assume the risk-free rate is 3% and the market risk premium is 7%. a. What does the CAPM predict the expected return for each stock should be? b. Clearly, the CAPM predictions are not equal to the actual expected returns, so the CAPM does not hold. You decide to investigate this further. To see what kind of mistakes the CAPM is making, you decide to regress the actual expected return onto the expected return predicted by the CAPM.49 What is the intercept and slope coefficient of…
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What would be the approximate expected price of a stock when dividends are expected to grow at a 26% rate in each of years 2 and 3, and then g at a constant rate of 8% if the stock's required return is 16% and next year's dividend will be $4.80? Multiple Choice $78.35 О $72.86 $79.42 О $87.24