Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 7, Problem 7.6WUE
Summary Introduction

To determine: The value of the BR stocks.

Introduction: Common stock is a security which represents the ownership in company. Common stock holder have are right to take decision on corporate policy.

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The current share price of Victoria Plc. is $49. The company has just paid a dividend of $2.5 per share. Dividends are expected to rise by 5 percent per year indefinitely. The company is in a higher systematic risk class than the average share.a. Calculate the intrinsic value of one share of Victoria Plc. if the required rate of return is 15 percent.b. What is the cost of equity capital of Victoria Plc.?
Maynard Steel plans to pay a dividend of $2.82 this year. The company has an expected earnings growth rate of 3.9% per year and an equity cost of capital of 9.5%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $0.95 this year and use the remaining $1.87 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Maynard's share price will be $ (Round to the nearest cent.)
Maynard Steel plans to pay a dividend of $2.89 this year. The company has an expected earnings growth rate of 3.7% per year and an equity cost of capital of 10.9%. a. Assuming​ Maynard's dividend payout rate and expected growth rate remain​ constant, and Maynard does not issue or repurchase​ shares, estimate​ Maynard's share price.   b. Suppose Maynard decides to pay a dividend of $0.98 this year and use the remaining $1.91 per share to repurchase shares. If​ Maynard's total payout rate remains​constant, estimate​ Maynard's share price.   c. If Maynard maintains the same split between divdends and​ repurchases, and the same payout​ rate, as in part ​(b​), at what rate are​ Maynard's dividends, earnings per​share, and share price expected to grow in the future? Note​: The share price is expected to also grow at the same rate as dividends and earnings per share.

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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)

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