Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter ST3, Problem 3CQ
To determine
Reason for a firm that does not pay its dividend even when it has a sizable profit.
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Suppose that you have bought a total of 3200 shares of stock of a particular company. You bought 1200 shares of stock at $18 per share, 800 shares of stock at $10 per share, and the remaining shares at $21 per share. What is the average price you paid per share of stock? (please round your answer to 2 decimal places)
If a firm earns $500 million in profits for the year and they retain $175 million, how much do they pay in dividends?
You believe that a corporation’s dividends will grow by 6% in the foreseeable future. If the company’s last dividend payment was $20, what should be the current price of the stock assuming that the market interest rate is 10%? If your computed price is lower than the actual market price, should you buy or sell the stock? Why?
Chapter ST3 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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- On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $21 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $18 per share. The stock continued to pay 25¢ a share on all 20 shares. After 3 years (12 quarters), you decided to sell the stock since it had increased in market value to $24 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. What is the effective interest rate per year? The effective interest rate per year is %.arrow_forwardCalculate the value of change in stock if closing stock is $100 million and opening stock is $70 millionarrow_forwardThe price these buyers are willing to pay for the stock is called _____________.arrow_forward
- We have had similar reductions in stock prices to those in 1929 before and after the Great Depression. What historical events took place that directly led to the prolonged depressed conditions like those of the 1930s?arrow_forwardWhat is a bond? A certificate representing a loan from an investor to a corporation or government entity that makes fixed payments for a set time and eventually pays back the loan in full. A certificate of ownership in a corporation with the right to a percentage of the earnings. A payment for an investor to a corporation for the rights to future profits. A group of stocks sold together for a set price.arrow_forward
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