The common stocks of XYZ Company are currently trading (beginning of 2017) at $ 20 on the market. The company has just distributed an annual dividend of $ 2.70 per share to its common shareholders. The dividends for the first, second and third year are $ 3.05, $ 3.33 and $ 3.59 respectively. From the start of the fourth year, dividends are expected to increase at an annual rate of 6% per year indefinitely. 1. Value the stock if the company's shareholders require an effective

The common stocks of XYZ Company are currently trading (beginning of 2017) at $ 20 on the market. The company has just distributed an annual dividend of $ 2.70 per share to its common shareholders. The dividends for the first, second and third year are $ 3.05, $ 3.33 and $ 3.59 respectively. From the start of the fourth year, dividends are expected to increase at an annual rate of 6% per year indefinitely. 1. Value the stock if the company's shareholders require an effective

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The common shareholders of BFG inc. received the following dividends (per share) in recent years: $0.10 in March 2019, $0.15 in March 2020, $0.15 in March 2021 and $0.20 in March 2022 (the dividend is still paid at the end of March). Dividend growth is expected to continue at the average historical rate for another four years. Thereafter, the dividend growth rate will be 5%. The rate of return demanded by the common shareholders of BFG inc. is 14%. Your valuation date is the beginning of April 2022. Calculate the average growth rate of the dividend per share over the last financial years, from March 2019 to March 2022 and calculate the price at which this common stock should sell based on the information provided to you.
The following table gives Foust Company’s earnings per share for the last 10 years.The common stock, 7.8 million shares outstanding, is now (1/1/19) selling for $65.00 pershare. The expected dividend at the end of the current year (12/31/19) is 55% of the 2018EPS. Because investors expect past trends to continue, g may be based on the historicalearnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) The current interest rate on new debt is 9%; Foust’s marginal tax rate is 40%, and its targetcapital structure is 40% debt and 60% equity.a. Calculate Foust’s after-tax cost of debt and common equity. Calculate the cost of equityas rs = D1/P0 + g.b. Find Foust’s WACC.Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).Editorial review has deemed that any suppressed content does not…
Countess Corp. is expected to pay an annual dividend of $3.97 on its common stock in one year. The current stock price is $68.04 per share. The company announced that it will increase its dividend by 3.20 percent annually. What is the company's cost of equity?
The company expected to pay dividend of $4 at end of the coming year (December 2022). The historical growth pattern for dividends is as follows: Year Dividend per share ($) 2021 3.75 2020 3.50 2019 3.30 2018 3.15 2017 2.85 Compute the price of common stock for 31 December 2021, given that required rate of return is 16.22 percent.
XYZ, Inc. declared on January 1, 2015, that it will pay a cash dividend of $1.00 per share at the end of 2015. Analysts expect that DPS (dividends per share) will grow at a rate of 20% each year for 2016 and 2017, and at 4% a year thereafter. Dividends are paid annually. Shareholders’ required rate of return is 15% per year in 2016 and 2017, and 8% thereafter. What is the share price on January 1, 2015?
MDL corporation had the following stock prices at the end of each year: 2017: $100, 2018: $150, 2019: $154.The company paid $2 dividend in 2019. Estimate themean return for MDL. The answer is 23%.
The income statement of Blue Co. in 2021 shows a net Income of P2,400,000. It is the policy of the company to pay an annual cash dividend of P5 per share to common stock. The company has a total of 600,00 outstanding common stocks that is currently trading at P25 per share. What is the Dividend yield? (type the answer in percentage with “%”)
The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.5 million shares outstanding, is now (1/1/20) selling for $74.00 per share. The expected dividend at the end of the current year (12/31/20) is 45% of the 2019 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS Year EPS 2010 $3.90 2015 $5.73 2011 4.21 2016 6.19 2012 4.55 2017 6.68 2013 4.91 2018 7.22 2014 5.31 2019 7.80 The current interest rate on new debt is 10%; Foust's marginal tax rate is 25%; and its target capital structure is 35% debt and 65% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. % Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. % b. Find Foust's WACC. Do not round…
Anthony Inc.’s common stock is currently selling for $20.00 per share. Their most recent annual dividend was $0.60, and the dividend is expected to grow at the rate of 10% annually in the future. What is the required return on Anthony’s common equity? Report the percentage to two decimal places
North Side Corporation is expected to increase its dividends at 6 percent (annual) rate over the next three years. If the company’s most recent dividend was $1.8, what are dividends for year 1, year 2 and year 3? a. $2.20; $2.42; $2.66 b. $1.91; $2.02; $2.14 c. $1.91; $2.87; $3.16 d. $2.20; $2.58; $2.75
A company paid quarterly dividends of $1 per share in 2000. In 2010, they were $1.10 per share. Today (2019) they are $1.75 per share. What is the CAGR (compounded annual growth rate) on the dividend? Round to the nearest zero decimal places and use the % symbol (e.g. 4%)
The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 8.0 million shares outstanding, is now (1/1/22) selling for $63.00 per share. The expected dividend at the end of the current year (12/31/22) is 50% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS Year EPS 2012 $3.90 2017 $5.73 2013 4.21 2018 6.19 2014 4.55 2019 6.68 2015 4.91 2020 7.22 2016 5.31 2021 7.80 The current interest rate on new debt is 8%; Foust's marginal tax rate is 25%; and its target capital structure is 55% debt and 45% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. % Calculate Foust's cost of common equity. Calculate the cost of equity as r; = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. % b. Find Foust's WACC. Do not round…

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