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Problem 1: Dividend Discount Model
A stock's current annual dividend is $1 per share and its current expected return is 10%. It is currently traded at $40 per share. Assume future expected returns and expected dividend growth remain the same forever. The risk-free rate is 2%.
(a). What is the market's expectation on the perpetual average growth rate for this stock?
(b). Imagine that the firm announces higher earnings than the analysts expected, so now this stock's dividends are expected to grow at an annual rate of 8% after the announcement. What is this stock's new price?
(c). Suppose you purchased this stock before the earnings announcement in (b) at $40. What is your one-year holding period return after the announcement? (Hint: You expect to receive one dividend payment in the next year)
Is fraud more likely to occur when it is being committed by top-level employees? Explain.
mixon companys year-end balance sheets show the following200620052004cash308003562536800accounts receivable
Results reported in the chapter show that by including either REITs or the NCREIF Index in a portfolio containing S&P 500 securities, corporate bonds, and T-bills, diversification benefits result. Why is this true?
Rhetorix, corporation produces stereo speakers.The selling price per pair of speakers is $900. The variable cost of production is $300 and fixed cost per month is $60,000.
imagine you are the treasurer of a japanese company exporting electronic equipment to the united states. discuss how
Pearson Brothers recently reported an EBITDA of $7.5 million and net income of $1.8 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?
Explain what types of financial and management goals Medi-Supply might have as the company moves forward to look for investors.
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In terms of demographic breakdown, was your applicant pool statistically different than your city's general demographic profile (at the 95% confidence level)?
Her credit card has a balance of $3,400 and she has an unpaid medical bill of $1,890. What is Marianne's net worth
Which of the gaps in Figure 3- 1 do you think represents the major problem for most firms? How can a company attempt to eliminate the knowledge gap? The communications gap?
The following year, IBM stock is trading at $104 per share while the real estate shares trade at $23.50. Calculate John's portfolio weights and returns.
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