Reference no: EM131188045
Return on Common Stock
You buy a share of The Ludwig Corporation stock for $20.00. You expect it to pay dividends of $1.10, $1.17, and $1.2445 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $31.71 at the end of 3 years.
a. Calculate the growth rate in dividends. Round your answer to two decimal places.
b. Calculate the expected dividend yield. Round your answer to two decimal places.
c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places.
Constant Growth Stock Valuation
Investors require a 18% rate of return on Brooks Sisters' stock (rs = 18%).
What would the value of Brooks' stock be if the previous dividend was D0 = $1.5 and if investors expect dividends to grow at a constant compound annual rate of (1) - 7%, (2) 0%, (3) 7%, or (4) 11%? Round your answers to the nearest cent.
1. $
2. $
3. $
4. $
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New production line is to overhaul the existing line
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Saving for college
: John Smith's son, Richard, is planning on attending a private college when he graduates from high school 5 years from now (2021). The annual tuition at the school is growing at a 6 percent rate and is expected to do so for the foreseeable future. How..
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Daily settlement of the futures contract
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Constant growth valuation-preferred stock rate of return
: Crisp Cookware's common stock is expected to pay a dividend of $2.5 a share at the end of this year (D1 = $2.50); its beta is 1.15; the risk-free rate is 3.5%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate ..
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Return on common stock-constant growth stock valuation
: You buy a share of The Ludwig Corporation stock for $20.00. You expect it to pay dividends of $1.10, $1.17, and $1.2445 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $31.71 at the end of 3 years. Calculate the growth rat..
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Calculate the required rate of return
: Calculate the required rate of return for Mercury? Inc., assuming that the risk free rate of return is? 5%, the expected market return is 11? percent, Mercury has a beta of? 2.0, and? Mercury's realized rate of return has averaged 14 percent over the..
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What is the? firms cost of new? equity
: Your? company’s stock sells for? $40 per? share, its last dividend? (D0) was? $2.00, its growth rate is a constant 5? percent, and the company will incur a flotation cost of? $4 per share if it sells new common stock. What is the? firm’s cost of new?..
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Nominal rate with interest compounded daily
: You plan to invest? $5,000 at the end of each of the next 10 years in an account that has a 9 percent nominal rate with interest compounded daily. How much will be in your account at the end of the 20? years?
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Depreciated using modified accelerated cost recovery system
: The Cosmo K Manufacturing Group currently has sales of $1,400,000 per year. It is considering the addition of a new office machine, which will not result in any new sales but will save the company $105,500 before taxes per year over its 5-year useful..
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