Determine the rate of return, Finance Basics

1. A stock pays no dividend and is expected to be sold for $50 after 4 years. If the investor's RRR is 12%, at what price is he/she willing to buy it?

2. ABC company has its ROE=10% and a retention rate at 30% of its net income for reinvestment purpose. It recently paid a dividend of $2. The stock is currently selling for $50. What is the expected rate of return for the stock? If your RRR is 12%, will you be willing to buy it? If your RRR is 15%, will you be willing to buy?

3. A common stock sells for $50 and will pay a dividend of $3.5 next period. The firm has a constant growth rate of 15%. What is the expected rate of return? If your RRR is 20%, will you buy it?

4. You're planning to buy between preferred Stock A and B. Stock A pays an annual dividend of $6 and is currently selling for $60. Stock B pays an annual dividend of $8 and is selling for $75. Which one will you buy?

 

 

Posted Date: 2/18/2013 6:35:37 AM | Location : United States







Related Discussions:- Determine the rate of return, Assignment Help, Ask Question on Determine the rate of return, Get Answer, Expert's Help, Determine the rate of return Discussions

Write discussion on Determine the rate of return
Your posts are moderated
Related Questions
The organization performed very well during the last year and generated profit in each segment. In the food and beverage segment, the company has made 30% net profit and in rooms a

The following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will

The following is the existing capital structure of Company XYZ Ltd. Ordinary shares at Shs.10 par 1,000,000 Retained 800,000 12% preference shares Shs.10 par 400,000 16% loan Shs.1

Uses and Application of Ratios Ratios are required in the following ways via managers in different firms. 1. Evaluating the efficiency of assets employment to generate sale

Financial management is very important for any organization as at the end what does matter is the money. An effective financial management is of high importance for ensuring the be

Lock-Box System In a lock-box system, the customer sent the payments to a post office box. The post office box is emptied with the firm's bank at minimum once or twice all bus

List and explain the three financial factors that influence the value of a business. Ans: The three issues that influence the value of a firm's stock price are cash flow , ti

Disadvantages of Payback Period 1. Does not receive into account time value of money and supposes that a shilling obtained in the 1 st year and in the N th year have the sim

Capital Asset Pricing Model (CAPM) CAPM is a methods that is used to establish the required rate of return of an investment provided a particular level of risk.  According to

Setting of Optimal Cash Balance Cash is often identified like a non-earning asset since holding cash quite than a revenue-generating asset includes a cost in form of foregone