Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)

14th Edition

ISBN: 9780133507690

Author: Lawrence J. Gitman, Chad J. Zutter

Publisher: PEARSON

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Concept explainers

Dividend Valuation

Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that…

Dividend Discount Model

Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is…

Capital Gains Yield

It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normal…

Stock Valuation

In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.

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Textbook Question

Chapter 9.4, Problem 9.10RQ

What premise about share value underlies the constant-growth valuation (Gordon growth) model that we use to measure the cost of common stock equity, r_s?

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Chapter 9.3, Problem 9.9RQ

Chapter 9.4, Problem 9.11RQ

Chapter 9 Solutions

Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)

Ch. 9.1 - Prob. 1FOE Ch. 9.1 - What is the cost of capital?Ch. 9.1 - Prob. 9.2RQ Ch. 9.1 - Prob. 9.3RQ Ch. 9.1 - What are the typical sources of long-term capital...Ch. 9.2 - Prob. 9.5RQ Ch. 9.2 - Prob. 9.6RQ Ch. 9.2 - Prob. 9.7RQ Ch. 9.3 - How would you calculate the cost of preferred...Ch. 9.4 - What premise about share value underlies the...

Ch. 9.4 - How do the constant-growth valuation model and...Ch. 9.4 - Why is the cost of financing a project with...Ch. 9.5 - Prob. 1FOP Ch. 9.5 - Prob. 9.13RQ Ch. 9.5 - Prob. 9.14RQ Ch. 9.5 - Prob. 9.15RQ Ch. 9 - Prob. 1OR Ch. 9 - Learning Goals 3, 4, 5, 6 ST9-1 Individual...Ch. 9 - Prob. 9.1WUE Ch. 9 - Prob. 9.2WUE Ch. 9 - Prob. 9.3WUE Ch. 9 - Weekend Warriors Inc. has 35% debt and 65% equity...Ch. 9 - Oxy Corporation uses debt, preferred stock, and...Ch. 9 - Prob. 9.1P Ch. 9 - Prob. 9.2P Ch. 9 - Prob. 9.3P Ch. 9 - Prob. 9.4P Ch. 9 - The cost of debt Gronseth Drywall Systems Inc. is...Ch. 9 - After-tax cost of debt Bella Wans is interested in...Ch. 9 - Prob. 9.7P Ch. 9 - Cost of preferred stock Determine the cost for...Ch. 9 - Prob. 9.9P Ch. 9 - Prob. 9.10P Ch. 9 - Retained earnings versus new common stock Using...Ch. 9 - The effect of tax rate on WACC K. Bell Jewelers...Ch. 9 - WACC: Market value weights The market values and...Ch. 9 - WACC: Book weights and market weights Webster...Ch. 9 - Prob. 9.15P Ch. 9 - Cost of capital Edna Recording Studios Inc....Ch. 9 - Prob. 9.17P Ch. 9 - Prob. 9.18P Ch. 9 - Calculation of individual costs and WACC Lang...Ch. 9 - Weighted average cost of capital (WACC) American...Ch. 9 - Prob. 9.21P Ch. 9 - Eco Plastics Company Since its inception, Eco...

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Use BMs data and the free cash flow valuation model to answer the following questions: (1) What is its estimated value of operations? (2) What is its estimated total corporate value? (This is the entity value.) (3) What is its estimated intrinsic value of equity? (4) What is its estimated intrinsic stock price per share?
Explain the theory behind the dividends-based valuation approach. Why are dividends value-relevant to common equity shareholders?

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