Homework Answers
Answer: C
Explanation:
We calculate the value of a stock by discounting its future cash
flows.
When inflation increases, the discount rate increases.
The expression is: Stock value=Summation of (Cash
flows)/(1+Discount rate)^Time period
As the denominator increases with increase in inflation, the stock
value decreases.
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I know the answer is C. However, please explain why this
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The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference...
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Please only answer if you know
for sure.
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: D Po = (rs - g) Which of the following statements is true? Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth. Increasing dividends will always increase the stock price. Increasing dividends...
Please only answer if you know
for sure, thank you.
Super Carpeting Inc. just paid a dividend (D) of $1.68, and its dividend is expected to grow at a constant rate (g) of 3.50% per year. If the required return (rs) on Super's stock is 8.75%, what is the intrinsic value of Super's shares? O $34.80 $32.00 $33.12 $48.00 O Which of the following statements is true about the constant growth model? When using a constant growth model to analyze...
6. Constant growth stocks Aa Aa E Consider the case of Urban Drapers Inc.: Urban Drapers Inc., a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $4.16 per share every year to its shareholders. In its most recent annual report, the company informed investors that it expects to maintain its constant dividend into the foreseeable future and that dividends are not...
Please only answer if you know,
thank you.
Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $5.25 dividend at that time (D3 = $5.25) and believes that the dividend will grow by 27.30% for the following two years (D4 and Ds). However, after the fifth year, she expects Goodwin's...
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