Earnings this year will be $6 per share, and investors expect a rate of return of 8% on stocks facing the same risks as Web Cites.a. What is the sustainable growth rate?b. What is the stock price?c. What is the present value of growth opportunities (PVGO)?d. What is the P/E ratio?e. What would the price and P/E ratio be if the firm paid out all earnings as dividends?(Do not round intermediate calculations. Round your answers to 2 decimal places.)> Answer is complete but not entirely correct.a.Sustainable growth rate2.00%b.Stock price$91.84 xC.PVGO$(13.78) Xd.P/E ratio10.20 xe.Price$75.00P/E ratio12.50

Sustainable Growth Rate (SGR):The sustainable growth rate (SGR) is a measure that represents the…

Answered: Earnings this year will be $6 per…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 14MC

See similar textbooks

Similar questions

Answer the multiple-choice question below: 1. A stock price P0=$23, and is expected to pay D1 = $1.242 one year from now and to grow at a constant rate of g=8% in the future. Suppose this analysis was conducted in January 1, 2002, what is the expected price at the end of 2002 and what is the Capital gains yield? Select one: a. P 12/31/02 = $34.24; Capital gains Yield 2002 = $4.50% b. P 12/31/02 = $24.84; Capital gains Yield 2002 = $8.4% c. P 12/31/02 = $21.40; Capital gains Yield 2002 = $18.4% d. P 12/31/02 = $24.84; Capital gains Yield 2002 = $8.0%
Assume that you are using the Capital Asset Pricing Model (CAPM) to find the expected return for a share of common stock. Your research shows the following: Beta = βi = 1.54 Risk free rate = Rf = 2.5% per year Market return = E(RM) = 6.5% per year Based on this information, answer the following: A. Based on the beta, how does the stock's risk compare to the market overall? On what do you base your answer? B. Based on the beta, how would you expect the stock's returns to react to a decrease in returns in the market overall? Why? C. According to the CAPM and the information given above, what is the expected return E(Ri) for this stock? D. If the required rate of return on this stock were 7% per year, would you invest? Why or why not?
1. (a) What are the two components of most stocks’ expected total return?(b) How does one calculate the capital gains yield and the dividend yield of a stock?(c) If D1 = RM3.00, P0 = RM50, and the expected P at t=1 is equal to RM52, what are the stock’s expected dividend yield, capital gains yield, and total return for the coming year?2. (a) Are stock prices affected more by long-term or short-term performance? Explain.(b) A stock is expected to pay a dividend of RM2 at the end of the year. The required rate of return is rs = 12%. What would the stock’s price be if the growth rate were 4%?What would the stock’s price be if the growth rate were 0%?3. If D0 = RM4.00, rs = 9%, and g = 5% for a constant growth stock, what are the stock’s expected dividend yield and capital gains yield for the coming year?4. (a) Explain what is meant by the terms “horizon (terminal) date” and “horizon (terminal) value”.(b)Suppose D0 = RM5.00 and rs = 10%. The expected growth rate from Year 0 to Year 1 (g0…
What is the capital gains yield of a constant growth stock with an expected growth rate of 0.04. The stock just paid a dividend of $3.34 and according to the Capital Asset Pricing Model the stock should return 0.03?
A stock price P0=$23, and is expected to pay D1 = $1.242 one year from now and to grow at a constant rate of g=8% in the future. Suppose this analysis was conducted in January 1, 2002, what is the expected price at the end of 2002 and what is the Capital gains yield?
I need help on this question ASAP: C. The following questions are related to the stock valuation and the required rate of return. (1) Based on the Gordon growth model, what is an investor's valuation of a stock whose current dividend is £2 per year if dividends are expected to grow at a constantr ate of 6% over a long period of time, and the investor's required rate of return is 10%? (2) Langkasuka Holdings expects to pay an annual dividend of $1.50 per share, and stock analysts expect the dividend to grow by 7% indefinitely. If Langkasuka Holdings current share price is $25, what would the required rate of return be? (3) A start-up technology company has projected earnings per share of $4.50. If the average technology industry P/E ratio is 30, what would the company's projected stock price be?
You observe a stock price of $18.75. You expect a dividend growth rate of 5%, and the most recent dividend was $1.50. What is the required return? Solve using Excel
How can i solve this problem without using excel? A financial calculator is ok. A stock is expected to pay a dividend of $1 in one year, and the stock's expected price in oneyear is $24. The equity cost of capital is 7.5%. What is: The current price of the stock (today) the capital gain rate the dividend yield
If D1 = $1.15, g (which is constant) = 5.24%, and P0 = $56.45, what is the stock's expected capital gains yield for the coming year? Please work out the problem, do not use excel.
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $58 a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $42. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $56. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? A Required What is the total rate of return for the stock? B Required What is the dividend yield and percentage capital gain? C Required Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)
Blue is currently selling for $26 per share. Its next dividend (in one year) is forecasted to be $1. Immediately after the dividend is paid, you expect the price to be $33. a. What is its expected dividend yield? b. What is its expected capital gain rate? c. What is the equity investors' expected return? Question content area bottom Part 1 a. Dividend yield: enter your response here%. (Round to two decimal places.) b. Capital gain rate: enter your response here%. (Round to two decimal places.) c. Expected Return: enter your response here%. (Round to two decimal places.)

SEE MORE QUESTIONS

Recommended textbooks for you

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS