You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $3 this year. Furtherm expect that they will pay out $2.25 of these earnings to shareholders in the form of a dividend at the end of this You estimate that LBE's return on new investments is 16% and their equity cost of capital is 13%. Your expecte rate for LBE's dividends will be closest to: OA. 4% OB. 3.3% O C. 1.6% OD. 2.4%

You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $3 this year. Furtherm expect that they will pay out $2.25 of these earnings to shareholders in the form of a dividend at the end of this You estimate that LBE's return on new investments is 16% and their equity cost of capital is 13%. Your expecte rate for LBE's dividends will be closest to: OA. 4% OB. 3.3% O C. 1.6% OD. 2.4%

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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HighGrowth Company has a stock price of $21. The firm will pay a dividend next year of $1.01, and its dividend is expected to grow at a rate of 3.6% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is %. (Round to one decimal place.)
Krell Industries has a share price of $21.55 today. If Krell is expected to pay a dividend of $1.08 this year and its stock price is expected to grow to $24.57 at the end of the year. The dividend yeild is? (Round to one decimal place)The capital rate gain is? (Round to one decimal place)The total return is? (Round to one decimal place)
CX Enterprises has the following expected dividends: $1.04 in one year, $1.22 in two years, and $1.34 in three years. After that, its dividends are expected to grow at 3.5% per year forever (so that year 4's dividend will be 3.5% more than $1.34 and so on). If CX's equity cost of capital is 11.8%, what is the current price of its stock? The price of the stock will be $0. (Round to the nearest cent.)
The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $2. This dividend is expected to grow at an annual rate of 17 percent for the next 3 years. The dividend is expected to increase by $1 in Year 4 and to grow at a constant annual rate of 8 percent thereafter. If you require a 28 percent rate of return on an investment such as this, how much would you be willing to pay per share? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent. $
The next dividend payment by Hoffman, Inc., will be $2.75 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. Assume the stock currently sells for $49.10 per share. a. What is the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the expected capital gains yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
HighGrowth Company has a stock price of $18. The firm will pay a dividend next year of $1.15, and its dividend is expected to grow at a rate of 3.5% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is%. (Round to one decimal place.)
The FI Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) Amount % per share
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Current stock price b. Value of ROE c. Amount % per share
Slow 'n Steady, Inc., has a stock price of $33, will pay a dividend next year of $2.90, and has expected dividend growth of 1.1% per year. What is your estimate of Slow 'n Steady's cost of equity capital? The required return (cost of capital) of levered equity is __ % ? (Round to one decimal place.)
Summit Systems will pay an annual dividend of $1.56 this year. If you expect Summit's dividend to grow by 5.8% per year, what is its price per share if the firm's equity cost of capital is 10.9%? The price per share is $ (Round to the nearest cent.) M
Mill Co. is expected to pay a dividend of $6 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 6.7% forever. If the current price of the stock is $55 per share calculate the expected return or the cost of equity capital for the firm.
Assume Gillette Corporation will pay an annual dividend of $0.62 one year from now. Analysts expect this dividend to grow at 12.5% per year thereafter until the 5th year. Thereafter, growth will level off at 1.9% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.1%?

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