Casamoca's common stock is selling for RM70 and recently paid dividends of RM5 per share based on
Question:
Casamoca's common stock is selling for RM70 and recently paid dividends of RM5 per share based on earning per share (EPS) of RM10. Firm's return on equity (ROE) is 15% and required rate of return is 14%.
a. What is the value of Casamoca's stock?
b. Should you purchase this stock? Why?
Shikazi Bhd is experiencing rapid growth. Dividends are expected to grow at 12% per year during the next 3 years, and then 8% per year indefinitely. The required rate of return on this common stock is 16% and the stock currently sells for RM33.60 per share. What is the expected dividend for the coming year (D1)?
Kandisi Bhd, a constant growth company has a current market stock price of RM32.00. Kandisi's next dividend is forecasted to be RM2.00 and Kandisi is growing at an annual rate of 6%.
a.What is Kandisi's dividend yield?
b.What is the expected rate of return for this company?
c. As a financial manager, you have access to insider information concerning a switch in product lines that would change the growth rate.
What growth rate would you have to use to get the new expected rate of return of 14%?
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston