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Determine the income yield, capital gains yield and total return given information (a) A 6 percent...
You are in an ordinary income tax bracket of 30% and capital gains tax bracket of 20 percent. Suppose you bought a Stock at the beginning of the year for $100 and sold it at the end of the year for $105. You also received $2.50 as dividend payments from this stock. What is your after-tax rate of return from this stock? Show all your calculations if you want partial credit.
Suppose you know that Paul's company stock currently sells for $58 per share and the required return on the stock is 12.00%. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If its the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
1. Assume that you are in the 40% federal-plus-state marginal tax bracket and that capital gains taxes are deferred until maturity. Assuming equal investment risk and a horizontal yield curve, rank the following investment opportunities on the basis of the effective annual yields: a. A $100 par value perpetual preferred stock with an annual coupon of 12%, quarterly payments, and selling at $105. b. A $1,000 par value, 20-year, non callable, semiannual bond with a coupon of 12% currently selling...
1.Suppose you bought 900 shares of stock at an initial price of $44 per share. The stock paid a dividend of $0.42 per share during the following year, and the share price at the end of the year was $39. a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.) b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate...
2. You just bought a newly issued bond which has a face value of S1,000 and pays its coupon once annually. Its coupon rate is 5%, maturity is 20 years and the yield to maturity for the bond is currently 8%. a. Do you expect the bond price to change in the future when the yield stays at 8%? Why or why not? Explain. (No calculation is necessary.) (2 marks) b. Calculate what the bond price would be in one...
80 The price of the consol is $ b. You are concerned that the interest rate may rise to 6 percent. Compute the percentage change in the price of the consol and the percentage change in the interest rate. Compare them. Instructions: Enter your response for dollar amounts rounded to the nearest penny (two decimal places ) and answers for percentages rounded to the nearest tenth (one decimal place). The new price of the consol would be $ 66.67 20...
QUESTION 6 What factor(s), besides the NPV of an investment, should managers consider in a capital budgeting decision? The effect of the investment on the manager's short-term incentives The effect of the investment on the company's reputation Tax shields related to depreciation that would result from the investment All three of the other answers 2 points QUESTION 7 Which of the following three investments will have the highest NPV? All three cases require an initial investment of $45,000, and...
Make a comparison between two investment choices, based on the information given below. Investment opportunity one: investing in stock market. Five years ago, SP500 stock index was 1312. Currently, it is 2618.97. What is the average annual rate of return of SP500 stock index in last five years? Investment opportunity two: Five years ago, someone used her $40,000 saving to make a down payment for a townhouse in RTP. The house is a three-bedroom townhouse and sold for $200,000 when...
my question is Q 29, zero coupon bonds ( part b and c continue on next page), thank you so much ! IOU (OU) 5.7 Apr 19, 2028 108.96 ?? 1.827 27. Bond Prices versus Yields [LO2) a. What is the relationship between the price of a bond and its YTM? b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon...
of $2,500, and a profit margin of 5 percent. 1. Braam Fire The firm has "Fire Prevention Corp, has sales of $3,000, total assets of $2,500 has a total debt ratio of 40 percent. What is the return on equity? A. 2.4 percent B. 8.4 percent C. 10 percent D. 12 percent E. 15 percent 54 dividends per share next year. The market requires a dividends grow at a constant rate of 6% 2. The Blue Moor 16% return on...