A stock costs $100 and pays a $6 annual dividend. If you expect to sell the stock after seven years for $120, what is your anticipated return on the investment? Round your answer to the nearest tenth. Anticipated return

A stock costs $100 and pays a $6 annual dividend. If you expect to sell the stock after seven years for $120, what is your anticipated return on the investment? Round your answer to the nearest tenth. Anticipated return

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 3P

See similar textbooks

Related questions

Q: Long Life Floors is expected to pay an annual dividend of $6 a share and plans on increasing future…

A: Any investor is willing to pay the present value of all future payments discounted at his required…

Q: Your investment of $450 in Stock A is worth $550 in two years while the investment of $300 in Stock…

A: Annual HPR = (End of period value -Initial Value)/ Initial Value Annual HPY =((End of Period Value…

Q: ) You are planning to buy a stock, which is estimated to pay dividends of $2.10 next year and grow…

A: In this we have to calculate the constant growth model.

Q: For the next five years, the annual dividends of a stock are expected to be P2, P2.10, P2.20, P3.50…

A: Year Particulars Amount 1 Dividend 2.00 2 Dividend 2.10 3 Dividend 2.20 4 Dividend 3.50 5…

Q: You buy a stock for $125, receive a dividend of $12 and sell the stock for $95 one year…

A: Dollar return =Closing price - Opening price + Dividend Dollar return = $95 - $125 + $12 Dollar…

Q: Malko Enterprises’ stock currently sell for $150. They pay an annual dividend of $10, and you can…

A: Current price of stock = $ 150 Annual dividend = $ 10

Q: An investor requires a return of 12 percent. A stock sells for $18, it pays a dividend of $1, and…

A: Gordon's growth model is one of the most commonly used variations of the dividend discount model.…

Q: What is the value today of a stock that will pay me $1 in dividends each of the next 5 years and…

A: A stock is a part of equity capital issued by a corporation for raising equity funds from the…

Q: A stock sells for $40 per share and pays a one-time dividend for the full year of $.75. One year…

A: Holding period is defined as the total amount that a person earns for keeping an assets for a period…

Q: Beta Corporation is expected to pay the following dividends per share over the next two years,…

A: Most amount willing to pay is present value of all future cash flows discounted at required rate of…

Q: A stock is expected to pay $1.55 per share every year indefinitely and the equity cost of capital…

A: price per share=dividendcost of equity

Q: The Uptowner will pay an annual dividend of $1.98 a share next year with future dividends increasing…

A: The Gordon model is a model that helps to compute the fair price of the stock with the help of…

Q: You buy 100 shares of stock for $50 per share. The stock pays a dividend of $2 per share per year.…

A: Return refers to the money made or lost out on an investment over some specified period of time. It…

Q: You buy a stock for $55 today, and sell the stock one year later for $54, during which time a $2…

A: Buying price = $55 Selling price =$54 Dividend =$2

Q: Net income for the year is $ 45 million.What Price would you expect to pay if you bought the stock…

A: Given that: Number of shares = 15,000,000 (15,000,000/1) Market price = $30 per share Stock…

Q: If you invest $9400 per year in a stock that grows at a rate of 8% per year, how much will your…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: You buy a stock from which you expect to receive an annual dividend of $3.00 for each of the seven…

A: Most amount willing to pay is sum of present value of all future cash flows discounted at required…

Q: What should you pay for a stock assuming you expect the following: a dividend of $1.00 paid at the…

A: Information Provided Cost of equity = 8% Dividend (both years) = $1 Selling price = $31

Q: What is the current value of Frocks & Socks Clothiers, Inc.to an investor who has a required rate of…

A: In this question we requires to calculate Current Stock Price P0 using the Dividend Discount Model:…

Q: You are thinking about buying a stock and holding it for 2 years. You expect that the stock will pay…

A: The stock price is defined as the maximum price that an investor is ready to pay for a stock. It is…

Q: A stock you are evaluating just paid an annual dividend of $2.50. Dividends have grown at a constant…

A: The question is based on the concept of Financial Management.

Q: What are the holding period and the annualized compounded returns if you buy a stock for $35 and…

A: Holding period returns = [ Sale Value - Purchase Value ] / Purchase Value * 100 Annualized…

Q: You plan to buy common stock and hold it for one year. You expect to receive both ₱150 and ₱260 from…

A: As per the arbitrage free pricing theory the price that should be paid = intrinsic value of the…

Q: Assume that you are considering an investment in a stock that is expected to pay a constant dividend…

A: In this question we need to compute the value of stock from following details : Annual dividend = 3…

Q: An investor has analyzed a stock for a one-year holding period. There is a fifty-fifty chance that…

A: The expected return will be determined by taking the average of both possible prices Tk. 55 and Tk.…

Q: You invest $10,000 in a stock and hold the stock for 3 years. Over the 3 year period, your…

A: value of the stock = investment*(1+gm)^3

Q: A stock costs $80 and pays a $2 annual dividend. If you expect to sell the stock after four years…

A: The required return on the stock represents the total return earned on the stock. This return is…

Q: You own 450 shares of Maslyn Tours stock that sells for $58.06 per share. If the stock has a…

A: We need to use dividend yield formula to calculate dividend par shares. Dividend yield =Dividend par…

Q: The current price of a stock is $78.86. If dividends are expected to be $1.00 per share for the next…

A: Current Rice (Po) = $ 78.86 Dividend from Year 1 to Year 5 = $ 1.00 Rate of return = 8 % PRice of…

Q: What is the current value of a share of McDonalds if its current dividend is $1.50 and dividends are…

A: The company can use the dividend discount model to calculate the current price of MacDonald's.

Q: Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of…

A: annual rate of return formula: annual rate of return =selling price+dividendbuying price-1

Q: he Highest Potential, Inc., will pay a quarterly dividend per share of $1 at the end of each of the…

A: Given information : Expected dividend = $1 Growth rate = 5% Discount rate = 10%

Q: Best Corporation is expected to pay $.60 next year and $1.10 the following year and $1.25 each year…

A: Dividend discounting model will be applied for discounting the future dividend in order to find out…

Q: You just purchased a stock for 21.43. If you expect the dividend in one year to be $ 2.25 and you…

A: Answer: Calculation of the price at which you should sell the stock in year 3 so that you will earn…

Q: (1) If you invest $3000 at the beginning of the year and get back $330 at the end of the year, what…

A: Note: As per Bartleby guidelines, only one question can be answered. Since, you haven't mentioned…

Q: You plan to buy common stock and hold it for one year. You expect to receive both ₱150 and ₱260 from…

A: A stock price is the present value of all the cash flows a stock is expected to generate. All the…

Q: Your broker recommends that you purchase Good Mills at $30. The stock pays a $2.20 annual dividend,…

A: In order to evaluate whether to buy the stock or not one should calculate the current stock price.

Q: An investor is going to buy a stock. He/she expects to receive 1.5 TL quarterly dividends and plans…

A: Stock value after a year = 25 Dividend quarterly = 1.5 Required return = 12%

Q: Suppose you purchased a stock a year ago. Today, you receive a dividend of $19 and you sell the…

A: The stock price is the market price that is paid at the time of purchase of the stock. The stock can…

Q: If you invest $2,000 in a stock and its value is doubled in five years, what is the return on your…

A: Compound Interest is calculated by multiplying the initial principal amount by one plus the annual…

Q: You sell a stock for $50.00 that was held for 10 years. You earned a return of 8%. What was the…

A: in this you have to calculate present value of stock.

Q: What is the holding period return per year for a stock that you bought for $70 pays you a $6…

A: Purchase Price = 70 Dividend in year 1 = 6 Dividend in year 2 = 6 Selling Price = 78

Q: Compute the total and annual returns on the described investment. Six years after buying 100…

A: Given: Years =6 Number of shares purchased = 100 Purchase price = $40 Selling price = $5,700

Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Help me please

Your turn - Problem #2
A stock costs $100 and pays a $6 annual dividend. If you expect to sell the stock after seven years for
$120, what is your anticipated return on the investment? Round your answer to the nearest tenth.
Anticipated return

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

The price of Outdoor Designs, Inc. is now 85. The company pays no dividends. Fred Gray expects the price four years from now to be 125 a share. Should Fred buy Outdoor Designs if he wants a 15 percent rate of return? Explain.
An investor is thinking about buying some shares of Health Diagnostics, Inc., at $75 a share. She expects the price of the stock to rise to $115 a share over the next three years. During that time, she also expects to receive annual dividends of $4 per share. Assuming that the investor’s expectations (about the future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Use either the approximate yield formula or a financial calculator to solve this problem.)
Calculation of gL and EPS Spencer Suppliess stock is currently selling for 60 a share. The firm is expected to earn 5.40 per share this year and to pay a year-end dividend of 3.60. a. If investors require a 9% return, what rate of growth must be expected for Spencer? b. If Spencer reinvests earnings in projects with average returns equal to the stocks expected rate of return, then what will be next years EPS? [Hint: gL = ROE Retention ratio.)
Start with the partial model in the file Ch07 P27 Build a Model.xlsx on the textbook’s Web site. Hamilton Landscaping’s dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%. What is Hamilton’s estimated stock price today? If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year? What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why aren’t these the same as for the first year?
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
Islander Corporation's common stock will pay a dividend of $3.50 one year from now. You plan to buy the stock now and sell at the end of one year for $70. At what price must you buy in order to receive your required return of 18%? Solve using excel