Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
10th Edition
ISBN: 9780077835422
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 13, Problem 17PS
a. Computer stocks currently provide an expected
b. If dividend growth
c. What (qualitatively) will happen to the company’s price-earnings ratio?
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a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market’s expectation of the dividend growth rate?b. If dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock?c. What (qualitatively) will happen to the company’s price–earnings ratio?
You are evaluating the stock of XYZ Corp. Suppose that the required rate of return for the firm is 20%. Suppose future dividends are expected to grow at 10% per year. The current stock price of the firm is $55. What is the expected dividend per share next year (D1)?
a.
$4.5
b.
$4.0
c.
$5.0
d.
$5.5
Earnings this year will be $6 per share, and investors expect a rate of return of 8% on stocks facing the same risks as Web Cites.
a. What is the sustainable growth rate?
b. What is the stock price?
c. What is the present value of growth opportunities (PVGO)?
d. What is the P/E ratio?
e. What would the price and P/E ratio be if the firm paid out all earnings as dividends?
(Do not round intermediate calculations. Round your answers to 2 decimal places.)
> Answer is complete but not entirely correct.
a.
Sustainable growth rate
2.00
%
b.
Stock price
$
91.84 x
C.
PVGO
$
(13.78) X
d.
P/E ratio
10.20 x
e.
Price
$
75.00
P/E ratio
12.50
Chapter 13 Solutions
Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 13 - Prob. 1PSCh. 13 - Prob. 2PSCh. 13 - If a security is underpriced [Lew intrinsic value...Ch. 13 - Deployment Specialists pays a current (annual)...Ch. 13 - Jand, Inc, currently pays a dividend of 1.22,...Ch. 13 - A firm pays a current dividend of 1, which is...Ch. 13 - Tri-coat Paints has a current market value of 41...Ch. 13 - A firm has current assets that could be sold for...Ch. 13 - Prob. 9PSCh. 13 - Miltmar Corporation will pay a year-end dividend...
Ch. 13 - Sisters Corp. expects to earn 6 per share next...Ch. 13 - Prob. 12PSCh. 13 - Prob. 13PSCh. 13 - A common stock pays an annual dividend per share...Ch. 13 - The risk-free rate of return is 5 , the required...Ch. 13 - Explain why the following statements are...Ch. 13 - a. Computer stocks currently provide an expected...Ch. 13 - Prob. 18PSCh. 13 - a. MF Corp. has an ROE of 16 and a plowback ratio...Ch. 13 - The market consensus is that Analog Electronic...Ch. 13 - The FE Corporation’s dividends per share are...Ch. 13 - The stock of Negro Corporation is currently...Ch. 13 - The risk-free rate of return is 8 , the expected...Ch. 13 - Prob. 24PSCh. 13 - Chiptech, Inc., is an established computer Chip...Ch. 13 - Prob. 1CPCh. 13 - 2. Phoebe Black‘s investment club wants to buy the...Ch. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Prob. 6CPCh. 13 - Prob. 7CPCh. 13 - Prob. 8CPCh. 13 - 9. To continue with Sundanci, Abbey Naylor. CFA,...
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