You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $5 this year. Furthermore, you expect that they will pay out $2.50 of these earnings to shareholders in the form of adividend at the end of this year. You estimate that LBE's return on new investments is 15% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to:OA. 3%OB. 6.5%OC. 7.5%OD. 4.5%

Growth rate = Plow back ratio * Return on investment.=[ 1-(Dividend per share /Earning per share…

Answered: You anticipate that Liebendauer…

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

See similar textbooks

Similar questions

Stability Corporation’s dividend is expected to be $1.60 next year. Its current stock price is $40 per share. The company is a constant growth firm. If investors require a return of 12 percent on this stock, what do they think Stability’s growth rate will be?
Jumbo Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 18 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 13 percent, and the stock currently sells for K65 per share. What is the projected dividend for thecoming year?
The firm just paid an annual dividend of $0.8 per share and plans to increase that amount by 25% next year. After that, the firm expects the dividend will grow by 3% annually. What is the expected value of this stock next year if the required return is 13 percent? 9.9 O 10.3 10.2
CompuCon is a new firm that just paid an annual dividend of $2.25 per share. The firm plans to increase its dividend by 23 percent per year for the next four years and then decrease the growth rate to 5 percent annually. If the required rate of return is 10.25 percent, what is one share of this stock worth today?
Gillette Corporation will pay an annual dividend of $0.61 one year from now. Analysts expect this dividend to grow at 11.4% per year thereafter until the 5th year. Thereafter, growth will level off at 2.2% per year. According to the dividend discount model, what is the value of a Gillette share if the firm's equity cost of capital is 8.9% ?
Spendex Corporation paid a dividend of $ 1.13 per share today. Dividends are expected to grow at 11.00% per year for the next 3 years, then at 8.00% per year in the following 2 years. After the 5th year, the growth in dividends is expected to remain constant at 6.00%. As an investor, you require a 10.00% rate of return on this equity investment. What is the maximum price you would be willing to pay for a share of Spendex?
Mobray Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $88 per share. What is the projected dividend for the coming year? (i.e. Div 1)
You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $3 this year. Furthermore, you expect that they will pay out $2.25 of these earnings to shareholders in the form of a dividend at the end of this year. You estimate that LBE's return on new investments is 16% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to: OA. 4% OB. 3.3% OC. 1.6% OD. 2.4%
Laurel Enterprises expects earnings next year of $4.43 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 11%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 4.4% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be? The current stock price will be $ (Round to the nearest cent.)
The firm just paid an annual dividend of $0.8 per share and plans to increase that amount by 25% next year. After that, the firm expects the dividend will grow by 2% annually. What is the expected value of this stock next year if the required return is 12 percent? 10.2 10.3 9.9

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS