CONNECT WITH LEARNSMART FOR BODIE: ESSE
11th Edition
ISBN: 2819440196246
Author: Bodie
Publisher: MCG
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Chapter 13, Problem 6PS
A firm pays a current dividend of
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A firm pays a current dividend of $2, which is expected to grow at a rate of 3% indefinitely. If the current value of the firm’s shares is $25, what is the required return applicable to the investment based on the constant-growth model?
A firm pays a current dividend of £2 which is expected to grow at a rate of 6% indefinitely.
If the current value of the firm is £40, what is the required rate of return of the stock? If next year’s earnings are projected at £5, what is the present value of growth opportunities (PVGO)?
(c) The firm increases its plowback, b. Would you expect the price of the
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A firm pays a current dividend of $1, which
is expected to grow at a rate of 6%
indefinitely. If the current value of the firm's
shares is $106, what is the required return
applicable to the investment based on the
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(DDM)? (Do not round intermediate
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Chapter 13 Solutions
CONNECT WITH LEARNSMART FOR BODIE: ESSE
Ch. 13 - Prob. 1PSCh. 13 - Prob. 2PSCh. 13 - If a security is underpriced [Lew intrinsic value...Ch. 13 - Deployment Specialists pays a current (annual)...Ch. 13 - Jand, Inc, currently pays a dividend of 1.22,...Ch. 13 - A firm pays a current dividend of 1, which is...Ch. 13 - Tri-coat Paints has a current market value of 41...Ch. 13 - A firm has current assets that could be sold for...Ch. 13 - Prob. 9PSCh. 13 - Miltmar Corporation will pay a year-end dividend...
Ch. 13 - Sisters Corp. expects to earn 6 per share next...Ch. 13 - Eagle Products’ EBIT is 300 , its tax rate is 21 ,...Ch. 13 - FinCorp’s free cash flow to the firm is reported...Ch. 13 - A common stock pays an annual dividend per share...Ch. 13 - The risk-free rate of return is 5 , the required...Ch. 13 - Explain why the following statements are...Ch. 13 - a. Computer stocks currently provide an expected...Ch. 13 - Prob. 18PSCh. 13 - a. MF Corp. has an ROE of 16 and a plowback ratio...Ch. 13 - The market consensus is that Analog Electronic...Ch. 13 - The FE Corporation’s dividends per share are...Ch. 13 - The stock of Negro Corporation is currently...Ch. 13 - The risk-free rate of return is 8 , the expected...Ch. 13 - Prob. 24PSCh. 13 - Chiptech, Inc., is an established computer Chip...Ch. 13 - Prob. 1CPCh. 13 - 2. Phoebe Black‘s investment club wants to buy the...Ch. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - 7. Shaar (from the previous problem) has revised...Ch. 13 - Prob. 8CP
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- A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm's shares is $35.00, what is the required return based on the constant growth dividend discount model (DDM)? Required returnarrow_forwardAssume the risk-free rate is 4% and the beta for a particular firm is 2, current firm share price is $35 and the market risk premium is 8%. A.Given the risk level, what is the one-year required rate of return (we will call this k)? B.If next year’s expected dividend is $3, use k from part A to solve for the expected next year’s price.arrow_forwardThe firm just paid a dividend of D0 = ₱ 0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The firm's beta is 1.15, the required return on the market is 9.50%, and the risk-free rate is 4.50%. What is the firm's current stock price? a. ₱ 7.97 b. ₱ 15.21 c. ₱ 16.79d. ₱ 5.64 e. ₱ 6.59 f. ₱ 16.65arrow_forward
- 5. The firm's expected year-end dividend is D1 = P 1.60, its required return is r, =11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is the firm's expected stock price in 7 years, i.e., what is P? a. P41.37 d. P43.44 с. Р 37.52 f. P43.56 b. Р39.40 e. P45.61 6. The firm just paid a dividend of Do =P 1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock's current market value? с. Р43.75 f. P 44.87 a. P41.59 d. P 46.87 b. Р42.65 e. P45.99arrow_forwardConsider the following security: Brous Metalworks Earnings Per Share, Time = 0 $2.00 Dividend Payout Rate 0.250 Return on Equity 0.150 Market Capitalization Rate 0.125 Required: Using the information in the tables above, please calculate the sustainable growth rate, dividends per share, and intrinsic value per share. Then solve for the present value of growth opportunities. (Use cells A5 to B8 from the given information to complete this question.) Brous Metalworks Sustainable Growth Rate Dividends per share (Next Year) Intrinsic Value No-Growth Value Per Share Present Value of Growth Opportunities (PVGO)arrow_forwardSuppose Dragons, Inc. is expected to pay an annual dividend of $0.85 at t=1. Thereafter the dividend will increase at a growth rate g = 25% for two years, and at a growth rate g = 3% after two years. What should you pay for the stock at t=0 if the appropriate discount rate is 8%? Group of answer choices 24.47 18.98 27.47 34.67arrow_forward
- 9. The last dividend paid by the firm was P 1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (r.) is 12.0%. What is the best estimate of the current stock price? а. Р 39.38 d. P 40.48 с. Р 37.05 f. P 53.61 b. Р38.16 e. P41.70 10. The last dividend paid by the firm was P 1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (r.) is 11%, what is its current stock price? а. Р 30.57 d. P 33.50 b. Р 34.50 с. Р 32.49 e. P31.52 f. P 36.82arrow_forwardSuppose a firm expects EPS of $1.50 for the end of period and expect to mantain a dividend payout ratio of 60%. if the firm's price earning ratio is 7.8 and its return on equity is 10%, what is its required rate of returnarrow_forwardSuppose you are told that returns on Treasury Bills are currently at 5% and the market returns is 12%. The beta value for Cilly Bhd is 1.2. a) What is expected required rate of return on investment for Cilly Bhd? b) If Cilly Bhd is forecast to pay next year's dividends of RM 1.50 per share and that the annual dividend growth rate is 8% p.a., what is the expected share price of Cilly Bhd?arrow_forward
- A firmrecently paid a dividend, D0, of $1.25. It expects to have nonconstant growth of 13% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 18%. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. What is the firm's intrinsic value today? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardWhat is the required rate of return on a share whose value is Kshs 62.50, its upcoming dividend is Kshs 5 and the growth rate is 4%?arrow_forward16) Suppose Bank is trading share at 17$ today. The company pays dividend of 0.25. The analysts claimed that in one year, target price will be 32$. What is the expected return?arrow_forward
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