Homework Answers
dividends
expected future stock price
1.
Stock 1
CI=1
CG=(77-65)/3=4
VI=5
Stock 2
CI=2.70
CG=(147-120)/3=9
VI=11.70
Approximate yield=VI/Current stock price
2.
Stock 1=5/65=7.69231%
Stoc 2=11.70/120=9.75000%
3.
True
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3. Forecasting stock value Aa Aa Understanding the returns from investing When buying stock, you can...
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When buying stock, you can expect to earn money through future current income (from ) and future capital appreciation (from ). Together, your total earnings from a given investment can be expressed in terms of the approximate yield. This value makes it easier for you to compare investment options. Understanding the Approximate Yield Equation The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2)...
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The formula for the approximate yield of an investment can look intimidating, but it's really just...
The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year periad and enter the values into the bottom half of the table. Stock 1 Expected average anual dividends (2012-2014) 140 Current stock price Expected...
drop down 1&2- •future current income • future capital appreciation dropdown 3- • 16.90 • 14.59...
drop down 1&2-
•future current income
• future capital appreciation
dropdown 3-
• 16.90
• 14.59
• 18.24
• 6.00
dropdown 4-
• 20.34
• 18.24
• 18.32
• 17.29
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6. Cost of new common stock
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3. Understanding the IRR and NPV 3. Understanding the IRR and NPV Aa Aa E The...
3. Understanding the IRR and NPV
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When buying stock, you can expect to earn money through future current income (from ) and future capital appreciation (from ). Together, your total earnings from a given investment can be expressed in terms of the approximate yield. This value makes it easier for you to compare investment options. Understanding the Approximate Yield Equation The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2)...
Assignment Chapter 12- Investing in Stocks and Bonds s Back to Assignment Attempt Keep the Highest: 13 3. Forecasting stock value Understanding the returns from investing hen buying stock, you can expect to earn money through future current income (from ) and future capital appreciation (from ). Together, your l earnings from a given investment can be expressed in terms of the approximate yield. This value makes it easier for you to compare investment options. tota Understanding the Approximate Yield...
The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year periad and enter the values into the bottom half of the table. Stock 1 Expected average anual dividends (2012-2014) 140 Current stock price Expected...
drop down 1&2-
•future current income
• future capital appreciation
dropdown 3-
• 16.90
• 14.59
• 18.24
• 6.00
dropdown 4-
• 20.34
• 18.24
• 18.32
• 17.29
page may not uncon Correctly. Click here to learn more 7. Forecasting mutual fund value Aa Aa Evaluating Mutual Fund Performance When buying a mutual fund, you might expect to earn money through (from dividends), (from increases in share price of the fund's underlying securities), or both. You can calculate...
6. Expected returns, dividends, and growth Aa Aa 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: D1 (rs -g) Po Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? O The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's...
6. Cost of new common stock
6. Cost of new common stock Aa Aa E True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. If a firm needs additional capital from equity sources once its retained earnings breakpoint is reached, it will have to raise the capital by issuing new common stock. True: Firms will raise all the equity they can from retained earnings before issuing new common stock because capital...
5. Constant growth stocks Aa Aa SCI just paid a dividend (Do) of $1.44 per share, and its 3.00% per year. If the required return (r.) on SCI's stock is 7.50%, then the intrinsic value of SCI's shares is annual dividend is expected to grow at a constant rate (g) of per share. Which of the following statements is true about the constant growth model? O When using a constant growth model to analyze a stock, if an increase in...
4. The cost of new common stock Aa Aa True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings O True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the...
3. Understanding the IRR and NPV
3. Understanding the IRR and NPV Aa Aa E The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Green Caterpillar Garden Supplies Inc.: Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers...
5. Intrinsic values and stock prices Aa Aa The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's true value based on expected future cash flows and the risks involved. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading ata price above its intrinsic value is considered to be overvalued...
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