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The stock of Nogro Corporation is currently selling for $29 per share. Earnings per share in the coming year are expected to be $3.90. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 21% rate of return per year. This situation is expected to continue indefinitely.
a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places.
b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.
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An investment banker has recommended a $100,000 portfolio containing assets B, D, and F. $20,000 will be invested in asset B, with a beta of 1.5; $50,000 will be invested in asset D, with a beta of 2.0; and $30,000 will be invested in asset F, with a..
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Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.00, but management expects to reduce the payout by 4.75 percent per year, indefinitely. If you require a return of 10 percent on this stock, what will you pay for..
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f their retained earning balance was $450,000 last year and $912,000 how much did they pay in dividends? What is the yield to maturity for a bond with the following attributes? 12 years to maturity, $1000 Par, 10% coupon, selling price $870?
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