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 return. 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

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 return. 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

Name: 1. The rate at which a stock's price is expected to appreciate (or de
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Description: 1. The rate at which a stock's price is expected to appreciate (or depreciate) is called theyield.A. currentB. totalC. dividendD. capital gains2. The underlying assumption of the dividend growth model is that a stock is worth:A. the present value of

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 14MC

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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.
(3) According to the Dividend-Discount Model Equation, the price of the stock today (Po) is equal to the present value of all of the expected future dividends (e.g., Divi, Div..., Divx) investors will receive, along with the cash flow from the sale of the stock (i.e., Ps) in year N (see, the following Equation). Div Div ₂ + L + 1+FE (1+E)² Po = + PN Div N (1+re)^ *(1+r)^ List three practical challenges (i.e., limitations) when using the Equation to calculate stock price (Po) in practice.
The dividend yield (i.e. D1/P0) is a good measure of the expected return on a common stock under which of the following circumstances? g = 0 g > 0 g < 0 g is expected to remain constant over time under no circumstances
Which one of the following is an underlying assumption of the dividend growth model? - A stock's value changes in direct relation to the required return. - A stock has the same value to every investor. - The dividend growth rate is inversely related to a stock's market price. - A stock's value is equal to the discounted present value of the future cash flows that it generates. - Stocks that pay the same annual dividend have equal market values.
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.
Given the constant growth dividend valuation model, the expected percentage growth in vau of a stock is equal to the capital gains yield for that stock. Select one: O True O False Previous page Next page Return ti: General
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 (Is - 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 an inverse relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.45 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter's stock currently trades for $29.00 per share, what is the expected rate of return? 713.36% 657.93% 1,104.83% 14.95% Which of the following conditions must hold true for the constant growth valuation…
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 PO (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 gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.85 at the end of the year. Its dividend is expected to grow at a constant rate of 6.00% per year. If Walter's stock currently trades for $26.00 per share, what is the expected rate of return? 6.10% 6.77% 16.96% 13.36% Which of the following statements will always hold true? The constant growth valuation formula…
The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year? O Dividend yield - Capital gains yield O (PO/D1) - g O (D1/PO)/g Dividend yield x Capital gains yield O Dividend yield + Capital gains yield
The dividend growth model I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point in time. III. can be used to value zero-growth stocks. IV. requires the growth rate to be less than the required return.
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(a) Compute the expected book value per share at time 1. (b) Compute the expected earnings per share of DTI at time 2. (c) Compute the expected value of the ex-dividend stock price at time 2. (d) Compute the expected value of the ex-dividend stock price at time 0. (e) Compute the expected return (over a single-period) on the stock of DTI at time 0 (in %).