Suppose you know that a companys stock currently sells for $65 per share and the required return
Question:
Suppose you know that a company’s stock currently sells for $65 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
We know the stock has a required return of 11 percent and ...View the full answer
Essentials Of Corporate Finance
ISBN: 9780073382463
7th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Business questions
-
Gesto, Inc., has an issue of preferred stock outstanding that pays a $4.50 dividend every year, in perpetuity. If this issue currently sells for $79.85 per share, what is the required return?
-
Gontier Corporation stock currently sells for $64.13 per share. The market requires an 11 percent return on the firms stock. If the company maintains a constant 5.5 percent growth rate in dividends,...
-
Framing Hanley, LLC, has identified the following two mutually exclusive projects: a. What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company...
-
Ira Icandoit is a staff auditor in the internal audit function of a small manufacturing company located in western Kansas. Ira recently completed a professional development course on a statistical...
-
The Central Publishing Company is about to publish its first reference hook in managerial economics. It is now in the process of estimating costs. It expects to produce 10,000 copies during its first...
-
Which of AD best describes the F-statistic? A. (Between-group variability)/(total variability) B. (Total variability)/(between-group variability) C. (Between-group variability)/(within-group...
-
Larry Riley formed a rental agreement for a self-storage unit with Iron Gate Self Storage in December 2003. The agreement stated that a maximum of \($5,000\) of personal property could be stored in...
-
Putnam Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials1 pound plastic at $7.00 per pound ....$ 7.00 Direct labor1.5 hours at $12.00...
-
4.4.4. The shareholders of Zedzee Pty Ltd are Sufyaan (10 shares), Shahedah (10 shares), Hilton (10 shares) and Sue (10 shares). The directors are Sufyaan and Shahedah. Upon registration, Zedzee...
-
CableTech Bell Corporation (CTB) operates in the telecommunications industry. CTB has two divisions: the Phone Division and the Cable Service Division. The Phone Division manufactures telephones in...
-
Bruer, Inc., is expected to maintain a constant 5.8 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.3 percent, what is the required return on the companys...
-
Bowman Corp. pays a constant $13 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this...
-
Draw figures that show your indifference curves for the following pairs of goods: Right gloves and left gloves Coca-Cola and Pepsi Tylenol and acetaminophen (the generic form of Tylenol) Desktop...
-
As the providers of health care, what do the practitioners (including physicians and nurses) want to see in further health reform? What characteristics of reform rise to their top priority? Is their...
-
What type of problem-solving approach results from a health services organization setting a vague performance improvement goal?
-
Write a simple "Hello World" GUI application with at least five different objects (such as Text, Button, etc.). The UI elements do NOT need to be functional. The title of the main stage should be...
-
Determining the benefits of inspections How could carrying out health and safety inspections, prior to this accident occurring, have benefitted the nursery?
-
What is the importance of understanding cultural diversity in health care? How cultural diversity could impact negatively and positively in healthcare? How to improve cultural competence care in...
-
Eyre Inc. signs a 10-year, 7%, $300,000 mortgage payable on November 30, 2011, to obtain financing for a new building. The terms provide for monthly payments. Prepare the entries to record the...
-
Refer to Example 9.15. Add the following functionality to this program: Allow the user to enter the cost of a gallon of gas on each trip and use a function, Cost() to calculate the cost of purchasing...
-
Suppose a companys operating cash flow was negative for several years running. Is this necessarily a good sign or a bad sign?
-
Tri-State Megabucks Lottery advertises a $10 million grand prize. The winner receives $500,000 today and 19 annual payments of $500,000. A lump sum option of $5 million payable immediately is also...
-
Suppose you won the Tri-State Megabucks Lottery in the previous question. What factors should you take into account in deciding whether you should take the annuity option or the lump sum option?
-
What regulatory frameworks govern the research, development, and commercialization of products derived from recombinant DNA technology, and how do they ensure safety, efficacy, and ethical standards...
-
How will MBG record the July 11 transaction? (4 marks) a. increase Advertising Expense and decrease Prepaid Advertising by $226 each, and also decrease Cash and increase Wages Expense by $75 each b....
-
Exhibit 11 THE MERGER OF HEWLETT-PACKARD AND COMPAQ (A): STRATEGY AND VALUATION Yield Curve for U.S. Treasury Bonds Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr 2/4/2002 1.7 1.77...
Study smarter with the SolutionInn App