Question: Yesterday, September 22, 2012, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLCs financial prospects are particularly bright, investors believe

Yesterday, September 22, 2012, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLC’s financial prospects are particularly bright, investors believe that the company will increase its dividend by 20 % per year for the next four years. After that, investors believe WLC will increase the dividend at a modest annual rate of 4%. Investors require a 16 % return on WLC stock, and WLC always makes its dividend payment on September 22 of each year.

a. What is the price of WLC stock on September 23, 2012?

b. What is the price of WLC stock on September 23, 2013?

c. Calculate the percentage change in price of WLC stock from September 23, 2012, to September 23, 2013.

d. For an investor who purchased WLC stock on September 23, 2012, received a dividend on September 22, 2013, and sold the stock on September 23, 2013, what was the total rate of return on the investment? How much of this return came from the dividend, and how much came from the capital gain?

e. What is the price of WLC stock on September 23, 2016?

f. What is the price of WLC stock on September 23, 2017?

g. For an investor who purchased WLC stock on September 23, 2016, received a dividend on September 22, 2017, and sold the stock on September 23, 2017, what was the total rate of return on the investment? How much of this return came from the dividend, and how much came from the capital gain? Comment on the differences between your answers to this question and your answers to part (d).

Step by Step Solution

★★★★★

3.49 Rating (169 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a b c 192117851 00762 or 762 d 19211501785 1785 01602 or 1602 A... View full answer

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

428-B-C-F-S-V (309).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Calculate the percentage change in K; for the reaction CH30H (g) + NOCl(g) ;:='0HCl(g) + CH3N02(g) when the total pressure is increased from 1.0 bar to 2.0 bar at constant temperature.

Calculate the percentage change in photon energy during a collision like that in Fig. 38-5 for = 90o and for radiation in (a) The microwave range, with = 3.0 cm; (b) The visible range, with = 500 nm;...

An investor who purchased a $10,000 mortgage bond today paid only $6000 for it. The bond coupon rate is 8% per year, payable quarterly, and the maturity date is 18 years from the year of issuance....

Please help with this question Yesterday, September 22, 2012, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLC's financial pros believe that the company will...

5. Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLC's financial prospects are particularly bright, investors believe the company wil...

Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLCs financial prospects are particularly bright, investors believe that the company...

Please note I only need help with parts e,f and g of the question with detailed formulas. Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share....

Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Because WLCs financial prospects are particularly bright, investors believe that the company...

Hello, good day. Please feel free to take the question as you see it, do try the question with all the parts approaching the correct answer, prefer typing but handwriting is okay. Then you will...

Yesterday, September 22, 2009, Wireless Logic Corp. (WLC) paid its annual dividend of $1.25 per share. Investors believe WLC will increase the dividend at a modest annual rate of 4 percent...

With all the discussion about climate change in the past couple of decades, it is no surprise that the occurrence of several intense hurricanes over the past several years has garnered some...

Solve the differential equation y (k+2) + 3y (k+1) + 2y (k) = u(k) where y (0) = 1, y(k)=0 for k

What is the correct interpretation of a favorable materials yield variance? A Fewer of each type of material were used than were allowed to be used for actual production.B Fewer total units of...

On January 1, 2014, PVP Corporation had 900,000 shares of common stock outstanding. On March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the corporation...

Unilever is an international company that owns brands in the food, beverage, cleaning agent, and personal care product industries. With 4 million consumer connections across all of North America, the...

In the figure, we can see The cable system supporting the loads. Find the magnitude of forces S and T for equilibrium in the position shown in the figure below 4m,.4m 3m B 2n

11-8. (Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 5,000 of these per year for 5 years (after which time this project is expected to shut down...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security ..... Yield (%) Treasury ...... 3.1 AAA corporate .... 3.2 BBB corporate .... 4.2 B...

Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from Standard and...

The Isabelle Corporation rents prom dresses in its stores across the southern United States. It has just issued a five-year, zero-coupon corporate bond at a price of $74. You have purchased this bond...

Bellwood Corp. is comparing two different capital structures. Plan I would result in 23,000 shares of stock and $81,000 in debt. Plan II would result in 17,000 shares of stock and $243,000 in debt....

Suppose the expected returns and standard deviations of stocks A and B are E( RA ) = 0.13, E( RB ) = 0.19, A = 0.28, and B = 0.52, respectively. (a) Calculate the expected return and standard...

Consider the following scenario: Company A contracts with Company B to supply widgets. At the time of signing the contract B pays $175 in advance for the widgets, which it plans to sell in turn for...