Nike corporation has expected earnings of$1.25 per share and a return of 12%. Youanticipate Nike's earnings will grow at 5% peryear indefinitely and Nike will retain its 40%plowback ratio. By how much does Nike's ROEexceed the stock's return?A. 2%B. 1%C. 1.5%D. 0.5%

in this we have to find out return on equity and find out the difference.

Answered: year indefinitely and Nike plowback…

Business

Finance

year indefinitely and Nike plowback ratio. By how m exceed the stock's return А. 2% В. 1% C. 1.5% D. 0.5%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

See similar textbooks

Related questions

Q: Set up the complete formula for Dollar Weighted Return (DWR) for the following portfolio including…

A: The dollar weighted return is nothing but the internal rate of return (IRR) of the portfolio when…

Q: The table below gives the historic return over the past five months for the market portfolio and two…

A: Beta (β) quantifies a stock's volatility concerning the overall market. A beta value exceeding 1…

Q: The figure in the popup window.. shows the one-year return distribution for RCS stock. Calcula a.…

A: The expected return of a probability distribution is the sum product of probability with its…

Q: Given the following Information, what is the standard deviation of the returns on a portfollo that…

A: We begin by calculating the standard deviation of each stock, followed by determining the covariance…

Q: The yearly rates of return for a stock are 0 .15, -0.04, .05, -0.07, 0.24, 0.03. In the following…

A: Taking average of the given returns

Q: You are considering an investment in either individual stocks or a portfolio of stocks. The two…

A: As per the Q&A guidelines, if multiple subparts are asked at once then the answer for the first…

Q: What is the most you should be willing to pay for the stock in the table? Expected Expected Price in…

A: The stock price which is the maximum price to be paid for share consists of dividends and terminal…

Q: If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock's expected total return…

A: INTRODUCTION Total return for the stock is calculated by considering two factors: dividend yield…

Q: . The expected return. The standard deviation of the return. lote: Make sure to round all…

A: Expected return is the mean return based on the weighted probability of the return of the stock when…

Q: 2-13 Historical Realized Rates of Return You are considering an investment in ei er individual…

A: Standard deviation: It is the measure of the deviation of values from its mean.

Q: EXCEL PROJECT AND EXCEL SOLUTION Consider the following stocks, all of which will pay a liquidating…

A: Note : Since you have posted too many questions, I am solving only first question with two…

Q: John Lewis of Hungerford plc may have returns next year as follows: Return probability…

Q: If a portfolio manager expects the market to go down by 2% next year, which stock should the manager…

A: Beta measures the sensitivity of a stock in relation to the change in the market return.change in…

Q: The rate on six-month T-bills is currently 5%. Andvark Company stock has a beta of 1.69 and a…

A: Risky stock is a stock which has higher risk as compared to the risk on the market portfolio. A…

Q: If risk free rate is 7% and the market return is 15%. Compute the expected and required return on…

A: We need to use CAPM to calculate required rate of return. Expected return =Risk free rate+…

Question

Nike corporation has expected earnings of
$1.25 per share and a return of 12%. You
anticipate Nike's earnings will grow at 5% per
year indefinitely and Nike will retain its 40%
plowback ratio. By how much does Nike's ROE
exceed the stock's return?
A. 2%
B. 1%
C. 1.5%
D. 0.5%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years and then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price?
Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?
If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11
CanPro Co. is expecting that its dividend for this coming year will be $1.2 a share and that all future dividends are expected to increase by 3 percent annually. What is the required return of this stock if the current market price of the stock is $17? a. 11.00% b. 9.67% c. 11.74% d. 10.06%
Albright Motors is expected to pay a year- end dividend of $3.00 a share (D1 = $3.00). The stock currently sells for $30 a share. The required (and expected) rate of return on the stock is 16 percent. If the dividend is expected to grow at a constant rate, g, what is g? a. 7.00% b. 13.00% C. 10.05% d. 5.33% e. 6.00%
3D printing Corp paid a dividend yesterday of $1 per share. The dividend is expected to grow at 29.00% per year for 2 years and then the growth rate will slow to 2.90% per year forever. If the required rate of return is 7.40%, then what is the current stock price? (Pls use formulas) a. $34.11 b.$36.63 c. 27.62 d.$35.63 e. $33.36
Beta Company last year's EPS was $2.60, and its expected EPS is $2 80 next year. The company's earning growth rate is expected to be 5% AOP PAXT YEAP 16 THP, Asuming the industry average P/E ratio of 7. The company's stock price is estimated to be (hint use the information provided, choose a stock valuation approach) O $18.20 O $19.11 O $20.50 O $10 00
Etling Inc.'s dividend is expected to grow at 8% for the next two years and then at 3% forever. If the current dividend is $3 and the required return is 15%, what is the price of the stock? Select one: O a. $26.00 Ob. $28.17 OC. $25.54 O d. $27.58 e. $25.10 B
Connolly Co.'s expected year-end dividend is D₁ = $2.75, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Connolly's expected stock price in 7 years, i.e., what is P7? Select the correct answer. a. $64.97 b. $63.05 O c. $63.53 d. $64.01 O e. $64.49
Target Corporation (TGT) just paid a $3.14 dividend, and it is expected to grow at 6.25% for the next 3 years. After 3 years the dividend is expected to grow at the rate of 2.95% indefinitely. If the required return is 7.12%, what is the stock’s value today? A. $61.67 B. $70.95 C. $84.97 D. $98.04
Sorenson Corp.'s expected year-end dividend is D1 = $1.50, its required return is rs = 14.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 6 years, i.e., what is P̃6? Do not round intermediate calculations. a. $35.46 b. $54.87 c. $27.00 d. $39.67 e. $36.73