Homework Answers
Earnings per share = $3 per share
Dividend per share = $3 * 30% = $0.9 per share
Retention ratio = 100 - dividend % = 100 - 30 = 70%
Return on equity = 5% ( given)
Growth(g) = Return on equity * Retention Ratio
= 5 * 70%
= 3.5%
Po = D1/(ke - g)
Where Po = Current stock price
D1 = Dividend next year = Current dividend + Growth = $0.9 + 3.5% = $0.9315
Ke = Required rate of return = 6%(given)
Po = $0.9315 / (6% - 3.5%)
= $ 37.26
So estimate of robert of price of stock will be $37.26
Add Answer to:
Q-3. (Stock Valuation) Robert is aiming to estimate the stock price of Hamilton Corp. The firm...
7. Stock Valuation. Burkhardt Corp. pays a constant $13.50 dividend on its stock. The company will...
7. Stock Valuation. Burkhardt Corp. pays a constant $13.50 dividend on its stock. The company will maintain this dividend for the next 9 years and will then cease paying dividends forever. If the required return on this stock is 9.2 percent, what is the current share price?
6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Divide...
6. Expected returns, dividends, and growth 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: PO D (rg Which of the following statements is true? Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes...
Assignment Stock Valuation 1. (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling...
Assignment Stock Valuation 1. (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $33. Dividends of S2 30per share were paid last year, return on equity is 20 percent, and its retention rate is 25 percent. a. What is the value of the stock to you, given a 15percent requiredrate of rectum? b. Should you purchase this stock? 2. (Measuring growth) Thomas, Inc.'s return on equity is 13 percent and management has plans to...
9. Problem 8-13 (Nonconstant Growth Stock Valuation) eBook Problem Walk-Through Nonconstant Growth Stock Valuation Simpkins Corporation...
9. Problem 8-13 (Nonconstant Growth Stock Valuation) eBook Problem Walk-Through Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 65% per year-during Years 4 and 5. After Year 5, the company should grow at a constant...
(Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation,...
(Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 13 percent, • the expected level of earnings at the end of this year (E1) is $4, • the firm follows a policy of retaining 30 percent of its earnings, • the return on equity (ROE) is 15 percent, and • similar shares of...
Which of the following statements is true? O Increasing dividends will always decrease the stock price,...
Which of the following statements is true? O Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. O Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth Walter Utilities is a dividend paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its...
Preferred stock valuation TXS Manufacturing has an outstanding preferred stock issue with a par value of...
Preferred stock valuation TXS Manufacturing has an outstanding preferred stock issue with a par value of $65 per share. The preferred shares pay dividends annually at a rate of 12%. a. What is the annual dividend on TXS preferred stock? b. If investors require a return of 8% on this stock and the next dividend is payable one year from now, what is the price of TXS preferred stock? c. Suppose that TXS has not paid dividends on its preferred...
Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation,...
Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions .the investor's required rate of return is 13 percent, the expected level of earnings at the end of this year (E1) is $8, the firm follows a policy of retaining 40 percent of its earnings, the return on equity (ROE) is 15 percent, and similar shares of stock sell at multiples of...
The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference...
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: Po = - D1 (rs - g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital...
Covid Corp's stock is selling for $215.61 in today's market. Its dividend has been growing at...
Covid Corp's stock is selling for $215.61 in today's market. Its dividend has been growing at 2.5% per year since the company first issued a dividend 12 years ago and is expected to continue growing at this rate forever. Investors have required a 6.20% return on this stock since it was founded and it is expected that this required rate of return will continue into the future. If Covid Corp's first dividend was $7.50, was is the best estimate of...
7. Stock Valuation. Burkhardt Corp. pays a constant $13.50 dividend on its stock. The company will maintain this dividend for the next 9 years and will then cease paying dividends forever. If the required return on this stock is 9.2 percent, what is the current share price?
6. Expected returns, dividends, and growth 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: PO D (rg Which of the following statements is true? Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes...
Assignment Stock Valuation 1. (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $33. Dividends of S2 30per share were paid last year, return on equity is 20 percent, and its retention rate is 25 percent. a. What is the value of the stock to you, given a 15percent requiredrate of rectum? b. Should you purchase this stock? 2. (Measuring growth) Thomas, Inc.'s return on equity is 13 percent and management has plans to...
9. Problem 8-13 (Nonconstant Growth Stock Valuation) eBook Problem Walk-Through Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 65% per year-during Years 4 and 5. After Year 5, the company should grow at a constant...
(Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 13 percent, • the expected level of earnings at the end of this year (E1) is $4, • the firm follows a policy of retaining 30 percent of its earnings, • the return on equity (ROE) is 15 percent, and • similar shares of...
Which of the following statements is true? O Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. O Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth Walter Utilities is a dividend paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its...
Preferred stock valuation TXS Manufacturing has an outstanding preferred stock issue with a par value of $65 per share. The preferred shares pay dividends annually at a rate of 12%. a. What is the annual dividend on TXS preferred stock? b. If investors require a return of 8% on this stock and the next dividend is payable one year from now, what is the price of TXS preferred stock? c. Suppose that TXS has not paid dividends on its preferred...
Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions .the investor's required rate of return is 13 percent, the expected level of earnings at the end of this year (E1) is $8, the firm follows a policy of retaining 40 percent of its earnings, the return on equity (ROE) is 15 percent, and similar shares of stock sell at multiples of...
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: Po = - D1 (rs - g) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital...
Most questions answered within 3 hours.
-
A space vehicle is coasting at a constant velocity of 18.1 m/s
in the +y direction...
asked 40 minutes ago -
5) Use the following balanced equation to answer questions
(a)-(i).
3 Cu(s) + 8 HNO3(aq) →...
asked 22 minutes ago -
A three-year maturity bond with a 12% annual coupon rate is
currently traded at par $1000...
asked 31 minutes ago -
1.
What is the minimum volume to use in the Spec 20 cuvette in order
to...
asked 1 hour ago -
A builder wants to install wall-to-wall carpeting in a living
room of length 8.87 m and...
asked 59 minutes ago -
Organizational change can produce anxiety in those affected by
the change. In what ways can change...
asked 1 hour ago -
Ozone in the atmosphere may react with nitric oxide.
From the following data, calculate the DG...
asked 1 hour ago -
Steven Long, a bond analyst, is analyzing a convertible bond.
The characteristics of the bond are...
asked 1 hour ago -
Michael Bordellet is
the owner/pilot of Stellar Air Service. The company flies a daily
round trip...
asked 1 hour ago -
Hi, I need to change the conversion where stack is into a class
stack and add...
asked 1 hour ago -
Consider the log logistic CDF F(t)=1/(1+(t/α)-β)
Find f(t), S(t), h(t), and H(t).
It can be shown...
asked 1 hour ago -
A gaseous mixture of methane and water vapor at
atmospheric pressure and 500 ° C is...
asked 1 hour ago