Which of the following would lead to the largest jump in the value of a stock?Increase in required rate of return by 3% points and decrease of dividend growth rate by 3% pointsDecrease in required rate of return by 3% points and decrease of dividend growth rate by 3% pointsIecrease in required rate of uturn by 3% points ancincrese of dividend grewth rate by 3% pointsDecrease in required rate of rotum by 3etsaind incrense ofdivident prowth rate ny 36 noints

The value of a stock is the dollar worth of the company that issues the stock, that is, the value of…

Answered: Which of the following would lead to…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 5MC

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Which of the following would lead to the largest jump in the value of a stock? Increase in required rate of return by 3% points and decrease of dividend growth rate by 3% points Decrease in required rate of return by 3% points and decrease of dividend growth rate by 3% points Increase in required rate of return by 3% points and incrcase of dividend growth rate by 3% points Decreasc in required rate of retum by 3% cointsandincrcaso of dividcnd prowth rate by 3% points
Using the constant dividend growth model, determine the percentage price change in a share when the required rate of return decreases from 19 to 17 per cent combined with a decrease in the dividend growth rate from 11 to 9 per cent. Select one: A. fall less than 2% B. rise more than 2%. C. rise less than 3% D. fall more than 2%
The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year? O Dividend yield - Capital gains yield O (PO/D1) - g O (D1/PO)/g Dividend yield x Capital gains yield O Dividend yield + Capital gains yield
Using the constant dividend growth model, determine the price change in a share when the required rate of return decreases from 15 to 13 per cent combined with an increase in the dividend growth rate from 5 to 6 per cent. Select one: a. fall more than 50% b. rise less than 50% C. fall less than 50% d. rise more than 50%
For Company ABC, if stock price P0 = $30; dividend paid at the end of period 1 D1 = $3.00; growth rate g = 5%; What’s the required rate of return for equity holder rs = ? If the flotation cost F = 10%; What’s the required rate of return for equity holder rs = ?
In the context of DDM, a dividend payout ratio equal to 100% implies that the future growth rate of dividends per share (DPS) will be equal to 0%. a. True b. False
If Do= $2.25, g (which is constant) = 3.5%, and Po= $44, what is the stock's expected dividend yield for the coming year? Select the correct answer. Oa. 4.15% b. 4.53% O c. 5.29% d. 4.91% O e. 5.67%
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: D1 PO (rs g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.85 at the end of the year. Its dividend is expected to grow at a constant rate of 6.00% per year. If Walter's stock currently trades for $26.00 per share, what is the expected rate of return? 6.10% 6.77% 16.96% 13.36% Which of the following statements will always hold true? The constant growth valuation formula…
Given the following data, what is the stock's expected growth rate according to the Gordon model? Dividend per share just paid: $3 Current market price: $35 Required rate of return: .10 Assume the stock is priced in equilibrium. Select one: O a. 2.45% O b. 4.32% O c. 3.56% Od. 1.32% c = X FILE
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: Po = D₁ (Is - g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.45 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter's stock currently trades for $29.00 per share, what is the expected rate of return? 713.36% 657.93% 1,104.83% 14.95% Which of the following conditions must hold true for the constant growth valuation…
Answer the multiple-choice question below: 1. WICB’s stock’s intrinsic value is $48.40, the required rate of return is 12.5 percent and the dividend growth rate is 10 percent, what is WICB’s recent dividend? Select one: a. $1.21 b. $4.80 c. $1.25 d. $0.20 e. $1.10
If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $42, what is the stock's expected dividend yield for the coming year? Select the correct answer a. 3.12% b. 2.84% c. 3.40% d. 2.56% e. 3.68%

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