PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 4, Problem 10PS
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Q31
Which of the following is equal to the present value of all cash proceeds received by a stock investor?
a.
Dividend payout ratio
b.
Retention ratio
c.
Discount rate
d.
Value
n the formula ke >= (D1/P0) + g, what does (D1/P0) represent?
Select one:
a.
The expected capital gains yield from a common stock
b.
The interest payment from a bond
c.
The expected dividend yield from a common stock
d.
The dividend yield from a preferred stock
How do stock prices vary with the following:
1. the expected growth rate of dividends (earnings);
2. the benchmark (risk-free) interest rate:
3. the equity premium
Chapter 4 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 4 - True/false True or false? a. All stocks in an...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...Ch. 4 - Dividend discount model Company Z-prime is like Z...Ch. 4 - Dividend discount model If company Z (see Problem...Ch. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Free cash flow Under what conditions does r, a...
Ch. 4 - Prob. 11PSCh. 4 - Prob. 12PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 23PSCh. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - DCF and free cash flow Permian Partners (PP)...Ch. 4 - DCF and free cash flow Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing Tree cash flow Phoenix Corp. faltered in...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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- When treasury stock is purchased for cash at more than its par value, what is the effect on total shareholders equity under each of the following methods?arrow_forwardExplain how to use the free cash flow valuation model to find the price per share of common equity.arrow_forwardUse B&M’s data and the free cash flow valuation model to answer the following questions: What is its estimated value of operations? What is its estimated total corporate value? (This is the entity value.) What is its estimated intrinsic value of equity? What is its estimated intrinsic stock price per share?arrow_forward
- The cost of preferred stock: a. is equal to the dividend yield b. is independent of the stock's price c. is equal to the YTM d. depends on dividend's growth ratearrow_forwardGive typing answer with explanation and conclusion Compare and discuss the relevant theory for the findings of the market reaction to dividend changes in (e(iii)). In your discussion, include signalling hypothesis, free cash flow hypothesis, and the clientele hypothesis. 3-day stock return: 1.96% 2-day stock return: 1.96% 3-day market index return: -1.64% 2-day market index return: -0.68% 3-day access return: 3.6% 2-day access return: 2.64%arrow_forwardWhen treasury stock is purchased for cash at more than its par value, what is the effect on total shareholders’ equity under each of the following methods?arrow_forward
- The required rate of return on a stock consists of two components, dividend growth rate on the stock measures which of the one component Capital gains yield Dividend yield Market growth rate Discount ratearrow_forwardThe 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 circumstancesarrow_forwardWhat does the additional paid-in capital account represent?a) The difference between the par and the stated value of common stock.b) The price changes that result for stock trading subsequent to its original issue.c) The market price of all common stock issued.d) The amount by which the original sales price of stock exceeds the par value.arrow_forward
- 1) Explain with a numerical example the advantages of stock repurchase compared to regular cash dividend.arrow_forwardMarket capitalisation is equal to O a. Number of shares x EPS O b. Number of shares x Book value O c. Number of shares x Market price O d. Number of shares x Face valuearrow_forwardThe value of anything can be determined if you know the amount and timing of related: Net Earnings EBT Cash Flows Earnings Per Share (EPS)arrow_forward
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