Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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ABC just
paid a dividend of D0 = $4. Analysts expect the company’s dividend to grow by
33% this year, by 28% in Year 2, and at a constant rate of 6% in Year 3 and
thereafter. The required return on this stock is 17%. What is the best estimate
of the stock’s current market value?
Note: Enter your answer rounded off to two decimal points.
Do not enter $ or comma in the answer box. For example, if your answer is
$12.345 then enter as 12.35 in the answer box.
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- BioScience Inc. will pay a common stock dividend of $4.45 at the end of the year (D₁). The required return on common stock (x) is 16 percent. The firm has a constant growth rate (g) of 8 percent. Compute the current price of the stock (Po). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current price Prev 9 of 10 MacBook Air Next >arrow_forwardAvondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3.00 and its current price is $84. What is its nominal annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ? % What is its effective annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ? %arrow_forwardThe stock of Business Adventures sells for $30 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Boom Normal economy Recession Dividend $ 2.00 1.40 0.50 Required: a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return Standard deviation Answer is complete and correct. Stock Price $ 40 34 25 14.33 22.60 Expected return Standard deviation b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) % % Answer is complete but not entirely correct. 8.75 11.30 % %arrow_forward
- Trump corporation's stock sells for $45.30 and is expected to pay a dividend of 2.40 next year. Dividends are expected to grow at 0.02 percent into the foreseeable future. What is the expected dividend yield on Trump stock for the first year? Answer should be to 2 decimals---Ex: .04 Be sure to round properly. ex. .036 rounds to .04 and .042 rounds to .04 Your Answer: Answerarrow_forwardSolve fastarrow_forwardBioScience Inc. will pay a common stock dividend of $5.20 at the end of the year (D1). The required return on common stock (Ke) is 14 percent. The firm has a constant growth rate (g) of 7 percent. Compute the current price of the stock (P0). (Do not round intermediate calculations. Round the answer to 2 decimal places.)arrow_forward
- Saks is expected to pay a dividend in year 1 of $1.92, a dividend in year 2 of $2.24, and a dividend in year 3 of $2.81. After year 3, dividends are expected to grow at the rate of 8% per year. An appropriate required return for the stock is 11%. What should the stock price be worth? (Do not round intermediate calculations. Round your answer to 4 decimal places.)arrow_forwardThe stock price of Baskett Co. is $70.79. Investors require a return of 12.6 percent on similar stocks. If the company plans to pay a dividend of $5.49 next year, what growth rate is expected for the company's stock price? (Do not round intermediate calculations and round your answer to two decimal points, i.e. 32.16)arrow_forwardA stock is expected to pay a dividend next year of $2.1. The dividend amount is expected to grow at an annual rate of 6.9% indefinitely. Assuming a required return on the stock of 10.8% in the future, the dividend yield on the stock is %. Margin of error for correct responses: +/- .05 Rounding and Formatting instructions: Do not enter dollar signs, percent signs, commas, X, or any words in your response. Do not round any intermediate work, but round your *final* response to 2 decimal places (example: if your answer is 12.3456, 12.3456%, or $12.3456, you should enter 12.35).arrow_forward
- Give typing answer with explanation and conclusion Huang Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 22.5% for 3 years, after which dividends are expected to grow at a rate of 4% forever. If the firm's required return (rs) is 12%, what is its current stock price? Do not round intermediate calculations.arrow_forwardTitan Technology's common stock pays a dividend that is expected to grow at 8% for one year and then grow at a more normal rate of 5% thereafter. Assume the current dividend is $1 per share and the required rate of return is 11% for common stock. Based on the above, what is Titan Technology's stock price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Numeric Responsearrow_forwardCarnes Cosmetics Co.'s stock price is $59, and it recently paid a $1.25 dividend. This dividend is expected to grow by 27% for the next 3 years, then grow forever at a constant rate, g; and rs = 11%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forward
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