Principles of Corporate Finance
Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 4, Problem 6PS

Dividend discount model True or false?

  1. a. All stocks in an equivalent-risk class are priced to offer the same expected rate of return.
  2. b. The value of a share equals the PV of future dividends per share.
  3. c. The value of a share equals the PV of earnings per share assuming the firm does not grow, plus the NPV of future growth opportunities.
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Assume an investor buys a share of stock for $18 at t = 0 and at the end of the next year (t = 1) , he buys 12 shares with a unit price of $9 per share. At the end of Year 2 (t = 2) , the investor sells all shares for $40 per share. At the end of each year in the holding period, the stock paid a $5.00 per share dividend. What is the annual time-weighted rate of return?
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Principles of Corporate Finance

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