The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year. Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return . The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder. The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Question

Want to see the full answer?

Answer 1

Question

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Anthony jacksons pro

Hello tutor this is himlton biotech problem.

Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.7 percent paid semiannually and 13 years to maturity. The yield to maturity of the bond is 5.05 percent. What is the dollar price of the bond?

Answer 2

Question

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 6

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 7

Chapter 18, Problem 11PS

A

Summary Introduction

To calculate: The current stock price according to DDM is to be determined when year-end dividend is $8 and the market capitalization rate is 10% per year.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 8

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 9

B

Summary Introduction

To calculate: The implied value of ROE on future investment opportunities when expected earnings per share are $12.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 10

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 11

C

Summary Introduction

To calculate: The amount market paying per share for growth opportunities is to be determined.

Introduction: The stock price is defined as the expected cash flow from the stock which is provided at discounted value at required rate of return.

The return on equity (ROE) can be defined as the return which is generated by the company’s operation for its equity holder.

The constant growth Discount Dividend Model (DDM) represents that the dividends grow at fixed percentage annually. This model is safe and helpful for the very mature companies which have history of regular dividends payment.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 15

Ch. 18 - Prob. 1PS Ch. 18 - Prob. 2PS Ch. 18 - Prob. 3PS Ch. 18 - Prob. 4PS Ch. 18 - Prob. 5PS Ch. 18 - Prob. 6PS Ch. 18 - Prob. 7PS Ch. 18 - Prob. 8PS Ch. 18 - Prob. 9PS Ch. 18 - Prob. 10PS

Solution Summary: The author calculates the implied value of ROE on future investment opportunities when expected earnings per share are 12.

Concept explainers

Videos

Want to see the full answer?

Chapter 18 Solutions