Question: ANSWER THE 3PROBLEMS BELOW:SHOW YOUR WORK a.If a stock is expected to pay an annual dividend of $40 forever, what is the approximate present value

ANSWER THE 3PROBLEMS BELOW:SHOW YOUR WORK

a.If a stock is expected to pay an annual dividend of $40 forever, what is the approximate present value of the stock, given that the discount rate is 8%?

b.If a stock is expected to pay an annual dividend of $30 forever, what is the approximate present value of the stock, given that the discount rate is 9%?

c.If a stock is expected to pay an annual dividend of $15 this year, what is the approximate present value of the stock, given that the discount rate is 12% and dividends are expected to grow at a rate of 4% per year?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

26. a. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 5%? b. If a stock is expected to pay an...

If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 5%? b. If a stock is expected to pay an annual...

Search w Help ET bcept 1 No Spac. Heading Heading 2 Intense Subtle Em.. Emphasis Normal Title Subtitle S Styles 1. SHOW YOUR WORK a. If a stock is expected to pay an annual dividend of $40 forever,...

6. Accounting costs A) are historical costs. B) are replacements costs. C) usually include implicit costs. D) usually include normal profits. Tasks Solving: (each worth of 0.3 points) 7. a. If a...

I need the answers only to the following questions. QUESTION 3 1. If D1 = $3.1, g (which is constant) = 2.5%, and P0 = $70.1, what is the stock's expected total return for the coming year? Note:...

Read this pages and answer all the self-test questions below The Trade-off between Risk and Return The table accompanying this box summarizes the histori- cal trade-off between risk and return for...

SOLVE THE PROBLEM BELOW:SHOW YOUR WORK If a stock is expected to pay a dividend of $50 for the current year, what is the approximate present value of this stock, given at discount rate of 7% and a...

Calculate the present value of a stock if this stock is expected to pay $2.5 annual dividend in the next 3 years, and it is expected to pay $3.5 annual dividend for year 4 to year 6. In year 7 and...

Gregory has one share of stock and one bond. The total value of the two securities is $ 1 , 0 3 0 . 9 6 . The bond has a YTM of 8 . 1 0 percent, a coupon rate of 8 . 2 0 percent, and a face value of...

If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 8%?

William Elias was the former owner of Direct Lending, a subprime mortgage company purchased by EA Management. Sometime after the sale, Elias went to Chase Bank and had three cashier's checks drawn to...

You noticed how popular recreational and high school hockey was in the county. There were no hockey supply stores around, so you opened one. Which strategy will actually "kill" your business? Select...

Evaluate the impact of regulatory compliance on airline financial performance

A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two...

9. Find a news article in a daily newspaper written by a journalist. How is this news article related to: (a) The writers expertise? (b) The context? (c) The personal characteristics of the writer?...

8. How can an interpreter influence the message?

The geographical location of the sender, i.e. where the sender resides