Consider a firm that paid a dividend of $3 per share yesterday. It has an ROE...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider a firm that paid a dividend of $3 per share yesterday. It has an ROE of 10% and it pays a constant fraction of its earnings as dividends. (a) Assuming a dividend growth rate of 2%, what is the firm's plowback ratio? (b) What dividend will the firm pay in a year from now? (c) If the firm's discount rate is 12%, what is its present value of growth opportunities? (d) What is the stock price? Consider a firm that paid a dividend of $3 per share yesterday. It has an ROE of 10% and it pays a constant fraction of its earnings as dividends. (a) Assuming a dividend growth rate of 2%, what is the firm's plowback ratio? (b) What dividend will the firm pay in a year from now? (c) If the firm's discount rate is 12%, what is its present value of growth opportunities? (d) What is the stock price?
Expert Answer:
Answer rating: 100% (QA)
a Plowback ratio The plowback ratio is the fraction of earnings that are retained by the firm and no... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
Students also viewed these finance questions
-
Consider a firm that pays no dividends. Next year's earnings are projected to be $1,500,000. The present value of growth opportunities is estimated to be $13,500,000. Suppose that there are 250,000...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Ann Carter, Chief Financial Officer of Consolidated Electric Company (Con El), must make a recommendation to Con Els board of directors regarding the firms dividend policy. Con El owns two...
-
Describe the three ways a client can reference a name from a namespace in C++.
-
We know that a certain piece of equipment will cost $150,000 in 5 years. How much will it cost today using 10% interest?
-
A business issued a 30-day, 4% note for $60,000 to a creditor on account. Illustrate the effects on the accounts and financial statements of recording (a) The issuance of the note and (b) The payment...
-
Refer to the bond situation of Hewitt Corporation in Exercise 15-27. Hewitt issued the bonds at the advertised price. The company uses the straight-line amortization method and reports financial...
-
Air travel on Mountain Airlines for the past 18 weeks was: a. Explain why an averaging technique would not be appropriate for forecasting. b. Use an appropriate technique to develop a forecast for...
-
Calculate the excess return (relative to the risk-free rate) of a stock during a period in which the stock price went from $106.17 to $276.64 and inflaton was 4.10%. Assume no dividend payments
-
On January 1, 2023, Psalm and Trisha formed PS Partnership. The articles of co-partnership provides that profit or loss shall be distributed accordingly: 15% interest on average capital balance....
-
A patient plans to attend weekly meetings to help with losing weight. For which potential competing demand would the nurse help the patient plan? a. Trash collection company establishing new rules...
-
A social venture is a business that seeks to solve a social problem and provide a social good. A social good is a product or service that benefits society. Clean air, clean water, literacy, and...
-
Oxygen enters a 6-in.-diameter duct with \(T_{1},=600^{\circ} \mathrm{R}, p_{1}=50 \mathrm{psia}\), and \(V_{1}=600 \mathrm{ft} /\) sec. The friction factor is \(f=0.02\). (a) What is the maximum...
-
The mass of an oxygen atom is \(2.6567 \times 10^{-26} \mathrm{~kg}\). Calculate the rms speed of an oxygen molecule with an average kinetic energy of \(1.38 \times 10^{-25} \mathrm{~J}\).
-
Air enters a circular duct with a Mach number of 3.0. The friction factor is 0.01 . (a) How long a duct (measured in diameters) is required to reduce the Mach number to 2.0 ? (b) What is the...
-
When three standard dice are rolled, find the probability that the sum of the dots on the three top faces will be 5 ?
-
An athlete is logging practice time for 3 weeks. If the athlete practices 3(2)/(3) hours the first week, 4(5)/(6) hours the second week, and 4(2)/(5) hours the third week, what is the average weekly...
-
Cassandra Casey operates the Futuristic Antique Store. She maintains subsidiary ledgers for accounts payable and accounts receivable. She presents you with the following information for October 2019:...
-
What does the lack of transparency in the bond market imply for bond investors?
-
Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Based on the historical record, use the NORMDIST function in Excel to answer the following questions: a. What is...
-
A company is contemplating a long-term bond issue. It is debating whether to include a call provision. What are the benefits to the company from including a call provision? What are the costs? How do...
-
The difference between two consecutive midpoints is equal to the class width. In Exercises 710, determine whether the statement is true or false. If it is false, rewrite it as a true statement.
-
max = 247, range = 93, 10 classes In Exercises 1114, use the given information about the data set and the number of classes to find the class width, the lower class limits, and the upper class limits.
-
The five best-selling smartphone manufacturers of 2020 were Apple (206.1 million units), Huawei (189.0 million units), Samsung (266.7 million units), vivo (111.7 million units), and Xiaomi (147.8...
Study smarter with the SolutionInn App