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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Chapter 13, Problem 4PS
Deployment Specialists pays a current (annual) dividend of
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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
A company will produce $3.00 in earnings per share at the end of the year. Reinvested earnings can produce a 14% return on equity. What is the PVGO if the company decides on a 30.0% plowback policy? Assume that investors have a 9.0% required rate of return.
a. $10.42
b. $12.56
c. $13.86
d. $15.56
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
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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- Investors require a 15% rate of return on Levine Company’s stock (that is, rs = 15%). Suppose the previous dividend was D0 = $2. What is the value of the company’s stock if investors expect dividends to grow at a constant annual rate in each of the following scenarios: (1) –5%, (2) 0%, (3) 5%, or (4) 10%? Using data from question a, what would the Gordon (constant growth) model value be if the required rate of return was 15% and the expected growth rate was (1) 15% or (2) 20%? Are these reasonable results? Explain. Is it reasonable to think that a constant growth stock could have g > rs? Explain.arrow_forwardFranktown Meats has just paid annual dividend of $2 per share. In the meantime, the company establishes a policy whereby the dividend will increase by 3% annually thereafter. How much will one share of this stock be worth three years (P3) from now if the required rate of return is 14.5% based on DGM model? Select one: O a. $20.21 O b. $19.57 OC $17.00 O d. $16.08 O e. $19.00 Marrow_forwardSorenson 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. $36.73arrow_forward
- Suppose DO = $2.00. rs= 9%, What if g = 30% the first year, 20% the second year, and 10% the third year, and return to its long-run constant growth rate of 4%, Calculate the value of the stock today? O $62.7846 O $55.5021 O $60.3211 O $65.7223 O $72.3487arrow_forwardI need help with questions a-darrow_forwardA company just paid a dividend of € 1 per share. If the dividend is expected to increase at a steady rate of 10% per year, calculate the value of the company's share if the required return is 25%. O a. €6.67 O b. €11.25 O c. €5.22 O d. €7.33 O e. None of the given answers is correct.arrow_forward
- Corenson Corp.'s expected year-end dividend is D1 = $4.00, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to b onstant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is P-? Do not round intermediate calculations. O a. $87.24 O b. $76.92 O c. $93.81 O d. $90.05 O e. $85.36arrow_forwardAnswer C and D correctly!arrow_forwardCredenza Industries is expected to pay a dividend of $1.50 at the end of the coming year. It is expected to sell for $61 at the end of the year. If its equity cost of capital is 9%, what is the expected capital gain from the sale of this stock at the end of the coming year? .... O A. $57.34 O B. $5.04 OC. $55.96 O D. $3.66 ..arrow_forward
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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY