Determination of current stock price also capital gains

Assignment Help Finance Basics
Reference no: EM1311012

Determination of current stock price also capital gains.

A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = -5%). If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?

a. The company's current stock price is $20.

b. The company's dividend yield 5 years from now is expected to be 10%.

c. The constant growth model cannot be used because the growth rate is negative.

d. The company's expected capital gains yield is 5%.

The company's expected stock price at the beginning of next year is $9.50.

Reference no: EM1311012

Questions Cloud

The work done by an object to lift another object : An object is lifted vertically 2m and held there. If the object weighs 30N, how much work was done in lifting it. Describe it briefly.
Journal entries to record depreciation of truck : Journal entries to record depreciation where the life of the truck is not extend and Prepare the journal entries to record the cost of the upgrade
Determine the work done by an object : Mattwe pulls his little sister sarah in a sled on an icy surface, with a force of 60 N at an angle of 37 ° upward from the horizontal. If he pulls her a distance of 12m, then determine the work done by matthew?
Appraisal of financial statements : Appraisal of Financial Statements and also wants you to increase the value of all plant assets to their appraised values
Determination of current stock price also capital gains : Determination of current stock price also capital gains and The constant growth model cannot be used because the growth rate is negative
Velocity and the potential energy of an object : Define the velocity and the potential energy of an object briefly.
Stock valuation beneath equilibrium situation : Stock valuation beneath equilibrium situation and Assuming the stock market is efficient and the stocks are in equilibrium
Required power by an object to lift another object. : Calculate the power required by an object to lift another object
Computation of npv : Computation of NPV and Using NPV calculations show the present value of the present collection experience.

Reviews

Write a Review

Finance Basics Questions & Answers

  Report showing practical application of strategic finance

Prepare a report showing the practical application of Strategic Finance

  Computing purchase happen on accounting rate of return

Annual net income from this equipment is evaluated at $8,100, $10,300, $17,900, and $19,600 for four years. Must this purchase happen based on accounting rate of return? Why or why not?

  Computed of future value of a bond and preferred stock

Computed of Future value of a bond and discussion on preferred stock, risk free rate, Beta, NPV, cost of debt,IRR.

  Computation of gain or loss on sale of investments

Computation of gain or loss on sale of investments and Journal entries to record purchase & sale of company's Common & Treasury stocks

  How would investors and management view eva and fcf?

How would investors and management view EVA and FCF? Try one that you are familiar with-you shop at their store, eat at their restaurants, or wear their clothes. On their Web site, try to find their annual financial report.

  Calculate the risk

Calculate the risk and expected return for each asset.

  Value drivers and horizon value of constant growth firm

Value Drivers and Horizon Value of Constant Growth Firm

  Procedure of loan amortization also capital recovery

Illustrate procedure of loan amortization also capital recovery through suitable example.

  Computing investor-s average degree of risk aversion

The standard deviation of the market portfolio is 22%. What is the representative investor’s average degree of risk aversion?

  Demand function has a negative slope

Over the past twenty years, the number of small family farms has fallen significantly also in their place there are fewer, but larger, farms owned by corporation.

  Explaining parent-subsidiary relationship between companies

Parent-Subsidiary relationship between companies develops when one company owns greater than 50% of another company voting stock.

  Find the price the bond with the right adjustments

Find the Price the Bond and Make sure you make the right adjustments to the data

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd