Common stock yield, Unit 4

. Assume an investor uses the constant-growth DVM to value a stock. Listed are various situations that could affect the computed value of a stock. Look at each one of these individually and indicate whether it would cause the computed value of a stock to go up, go down, or stay the same. Briefly explain your answers. Dividend payout ratio goes up. Stock’s beta rises. Market return increases. Assume throughout that the current dividend (D0) remains the same and that all other variables in the model are unchanged.

1. The rate at which a stock's price is expected to appreciate (or depreciate) is called the yield. A. current B. total C. dividend D. capital gains 2. The underlying assumption of the dividend growth model is that a stock is worth: A. the present value of the future income that the stock generates. B. the same amount to every investor regardless of his desired rate of return. C. an amount computed as the next annual dividend divided by the market rate of retum. D. an amount computed as the next annual dividend divided by the required rate of return. 3. The total rate of return earned on a stock is composed of which two of the following? 1. current yield II. yield to maturity III. dividend yield IV. capital gains yield A. I and II only B. I and IV only C. II and III only D. III and IV only 4. Which one of the following correctly defines the constant dividend growth model? A. R = (D₁ Po) + g B. Po = (D₁R) + g C. R=(Po Do) + g D. Po = Do ] (R-g) 5. How much are you willing to pay for one…

One stock valuation model holds that the value of a share of stock is a function of its futuredividends, and that the dividends will increase at an annual rate which will remain unchangedover time. This stock valuation model is known as the * A.approximate yield model. B.holding period return model. C.constant growth dividend valuation model. D.dividend reinvestment model.

Particulars АВС XYZ 1. Discount rate 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth rate Not 364.22 available Not 432.92 available Not 427.30 available 7. Fundamental value of stock using residual income growth model through sustainable growth rate 420.35 1662.60

n the formula ke >= (D1/P0) + g, what does (D1/P0) represent? Select one: a. The expected capital gains yield from a common stock b. The interest payment from a bond c. The expected dividend yield from a common stock d. The dividend yield from a preferred stock

You a portfolio manager. You have been provided the following information on stock prices and dividends.  Based on the given information, what is the geometric average return on this stock? Please show all the calculations by which you came up with the final answer.

Exploring Finance: Constant Growth Stock. Constant Growth Stock Conceptual Overview: Explore how the value of a stock changes as a function of the discount interest rate. The blue stair-step line depicts the value of future stock dividends. The orange stair-step line depicts the present value of those future dividends discounted by rs for a stock with initial dividend D0 = $1.15 and an anticipated growth rate of g = 4%. Use the slider to change rs and observe the corresponding changes in the equilibrium price of the stock. \large \hat P_0 = \sum_{t=1}^{\infty} PV D_t = \frac {D_0 (1+g)} {r_s - g} = \frac {\$1.15(1+0.04)} {0.08 - 0.04} = \$29.90​P​^​​​0​​=∑​t=1​∞​​PVD​t​​=​r​s​​−g​​D​0​​(1+g)​​=​0.08−0.04​​$1.15(1+0.04)​​=$29.90   1.  If rs increases to 10%, what would be the value of the constant growth stock? (Note: D0 is $1.15 and the expected constant growth rate g = 4%.) $29.90 $19.93 $10.87 Undetermined   2.  When rs increases from, say, 8% to 10%, the value of the constant…

3. Forecasting stock value Understanding the returns from investing 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) 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 period and enter the values into the bottom half of the table.   Stock 1 Stock 2 Expected average annual dividends (2012–2014) $0.95 $2.65 Current stock price $50 $119 Expected future stock price (2014) $62 $149…

How do stock prices vary with the following: 1. the expected growth rate of dividends (earnings); 2. the benchmark (risk-free) interest rate: 3. the equity premium

One stock valuation model holds that the value of a share of stock is a function of its ends will increase at an annual rate which will remain unchangedover time. This stock valuation model is known as the * approximate yield model. holding period return model. constant growth dividend valuation model. dividend reinvestment model.

The price of a stock is: Group of answer choices the future value of all expected future dividends, discounted at the investor’s required return. the present value of all expected future dividends, discounted at the investor’s required return. the present value of all expected future dividends, discounted at the dividend growth rate. the future value of all expected future dividends, discounted at the dividend growth rate.

Can you assist with question 7.

The price to earnings ratio (P/E) is determined by:   Question 6 options:   1)  expected dividend payout ratio   2)  estimated required return on the stock   3)  expected growth rate of dividends   4)  b and c only   5)  all the above

Exploring Finance: Betas and Stock Volatility. Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk measure. The tendency of a stock to move with the market is measured by its beta coefficient, b. When first loaded, the graph shows the line for an average stock, which necessarily matches the market return. In a year when the market returns 10%, the average stock returns 10%. And in a year when the market goes down -10%, the average stock goes down -10% also. The slope of the line for the average stock is b = 1.0. A more volatile stock would change more extremely. Drag the line vertically so that it has a slope of b = 2.0. For this more volatile stock, in a year when the market returned 20%, the volatile stock did better with a 30% return, and when the market lost -10%, the volatile stock lost big with a -30% change. Now drag the line so that it has a slope of b = 0.5. This stock is less volatile than the average stock and…

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) 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 period and enter the values into the bottom half of the table.   Stock 1 Stock 2 Expected average annual dividends (2012–2014) $1.25 $2.95 Current stock price $70 $116 Expected future stock price (2014) $82 $146 Average current income (CI) $   $   Average capital gains (CG) $   $…

What would be impact on price of stock if the required rate of return moves to, 12.5 percent, 13.5 percent and 14.5 percent? (Hint: Support your argument with help of graph

You ask a stockbroker what the firm’s research department expects for the three (3) stocksabove, that is, Stock X, Y and Z. The broker responds with the following information:Stock       Current Price       Expected Price           Expected Dividend  X                 22                        24                             0.75  Y                 48                        51                             2.00  Z                 37                        40                             1.25Required:B. Calculate the estimated future rate of return for Stock X, Y, and Z. C. Determine which stock is overvalued, undervalued, properly valued, and state whyD. Illustrate with the use of the Security Market Line (SML) how Stock X , Y and Z wouldappear on it.

Questions: Refer to the data of Omani common stock at below table, answer the following questions: Calculate the required rate of return (RRR) of stock. If beta coefficient decreases from 1.5 t0 0.5, what is the affect required rate of return. Build a theoretical framework depends on result of above questions. Beta Coefficient Stock Market Return Risk-free Return 1.5 10% 6%

Can you please answer and kindly show detailed human working.

Need help with this question solution general accounting

A dividend valuation model such as the following is frequent. where: Pi = the current price of Common Stock i D1 = the expected dividend in Period 1 ki = the required rate of return on Stock i gi = the expected constant-growth rate of dividends for Stock i   Identify the three factors that must be estimated for any valuation model, and explain why these estimates are more difficult to derive for common stocks than for bonds . Explain the principal problem involved in using a dividend valuation model to value: (1) companies whose operations are closely correlated with economic cycles. (2) companies that are of very large and mature. (3) companies that are quite small and are growing rapidly.

A stock's next expected dividend divided by the current stock price is the: current yield O total yield dividend yield O capital gains yield earnings yield 身

________ is a model for determining the price of a stock, based on a future series of dividends that grow at a constant rate.

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Calculating Return Components An investor purchases one share of stock for $50. After one year, they sell the share for $55. During the year, they receive $7 in dividends. a) What was the dividend yield, in percentage terms? b) What was the capital gain from price appreciation on the stock, in percentage terms? c) What was the total return in dollars? What was the total return, in percentage terms?