The required rate of return , Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value. Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Question

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Answer 1

Question

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

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The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…

The stock of Nogro Corporation is currently selling for $29 per share. Earnings per share in the coming year are expected to be $3.90. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 21% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require (round to 2 decimal places)? Rate of Return ?% b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested (round to 2 decimal places)? PVGO $?

The stock of Nogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require?b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested?c. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price?d. What if Nogro eliminated the dividend?

Answer 2

Question

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Expert Solution & Answer

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Answer 3

Question

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Expert Solution & Answer

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Answer 4

Question

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Expert Solution & Answer

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Answer 5

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 6

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 7

Chapter 18, Problem 12PS

A

Summary Introduction

To calculate: The required rate of return, Nogro’s investor wants assuming that the current market price of stocks reflects the intrinsic value.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 8

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 9

B

Summary Introduction

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 10

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 11

C

Summary Introduction

To calculate: The effect on stock price is to be determined when Nogro were to cuts its dividend payout ratio to 25%.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 12

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 13

D

Summary Introduction

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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

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To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Want to see the full answer?

Chapter 18 Solutions

Concept explainers

Videos

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested. Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

To calculate: The result is to be determined when Nogro eliminated the dividend. Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

Want to see the full answer?

Chapter 18 Solutions

To calculate: What will be happen when all earnings were paid as dividend and nothing is reinvested.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.

To calculate: The result is to be determined when Nogro eliminated the dividend.

Introduction: The required rate of return is defined as the return which is expected by the investor from an investment in firm and this return also justifies the risk of the investor.