Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay a dividend of $5. You expect to sell the stock after 3 years for $120. Is XYZ a good investment? Support your answer with calculations

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Q: how much should you be willing to pay for this stock today?

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Q: is this stock a good buy

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Q: Dylan expects an EBIT of $10000 every year forever. Dylan can borrow at 7 percent. Suppose Dylan…

A: Given Information :  EBIT = $10,000 Cost of Equity = 12% Tax rate = 35% Amount of Debt = $33,000

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A: We, have in the Question, D1= next year dividend = $1.50 G= growth rate = 4% market price = $28.50…

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A: 1. Prevent value= $10,000 Future value= $20,000 Interest rate=10% (assuming compounding is annual)…

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A: Present Value :— It means Value of Cash Flow today. It consider Time value of money for its…

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A: A model that helps to evaluate the value of the stock with the assumption that the dividend will…

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Q: If you plan to buy the stock, hold it for 3 years, and then sell it for $34.73, what is the most you…

A: Compute the price to be paid.

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

Q: You are offered a chance to purchase shares in a new company which sells franchises for MamaC Pizza.…

A: Intrinsic value of share = Annual dividend/required return

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A: Price of sharen = Dn+1 / ( Required return - Growth rate )

Q: What is the “total return” on your investment?  (remember, total return is more than ju

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A: In this dividend discount method is to be used to calculate price of stock.

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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

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A: Share price is the current price at which one share of the company is sold in the market. The…

Q: ppose you bought a stock of company AT&T_today: After 3 years, you can sell it at $30 At the end…

A: In this we have to calculate present value of dividend and price after three years.

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A: The value of any financial asset = present value of its future cashflows.  And dividend discount…

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A: Stock is the security that represents the ownership of the stockholder in the company. The stock…

Q: You consider buying a share of stock at a price of $950. The stock is expected to pay a dividend of…

A: expected return formula: expected return=selling price+dividendbuying price-1

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A: Intrinsic value is the fair value of the share or the value at which the share should be trading

Q: Ghaith has bought shares of RIO, Inc. stock for $25.00 per share. He expects a $1.00 dividend at the…

A: Given: Share purchased =$25Cash inflow in the form of dividend in year 1=$1Cash inflow in the form…

Q: You are interested in buying the preferred stock of a bank that pays a dividend of $1.55 every…

A: Dividend each quarter (D)= 1.55 Required rate per quarter (k)=8%/4= 2%

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A: when calculating the dividend expected of a stuff it is important to consider the growth prospect of…

Q: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

A: Intrinsic value of a stock is given by  IV = D1/(K - g) Where, D1 = expected dividend = 1.5 K =…

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: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

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A: The stock market is the market where the stocks and securities of various companies are traded which…

Q: Your first task in your new job at an investment bank is to price a new stock issue. You expect the…

A: Information given in the question is as follows: Dividend after 1 year = $2 Growth rate = 3% = 0.03…

Q: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

A: Next dividend (D1) = $1.50 Growth rate (g) = 4% Required rate of return (r) = 9% Stock price =…

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A: Preferred shareholders have a special right over equity shareholders. Preferred shareholder received…

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: One of your colleagues has recommended that you buy 10 shares in a certain company, say, ABC Ltd. He…

A: Intrinsic value of company is the internal estimate of the company’s worth. It is arrived by…