Estimate the expected rate of return

Assignment Help Financial Accounting
Reference no: EM132962449

Question - The average stock return of SSG PLC in the last ten years is 8.2%. At the end of 2019, the company's (current) dividend yield D0/P0 = 2.0%. Goldman Sachs, a leading global investment bank, predicts the company's dividend growth rates for the next five years are as follows:

2020

2021

2022

2023

2024

2.5%

5.2%

4.5%

4.3%

4.1%

Required -

a. Estimate the expected rate of return from investing in SSG, assuming the rate of dividend growth reverts to its long-run average of 4.0% per annum after 2024.

b. Assume that the historical average return of 8.2% is a good benchmark. Interpret your results.

c. Estimate the expected long-run dividend growth rate if an investor expects to earn the average historic return of 8.2%.

Reference no: EM132962449

Questions Cloud

Calculate eva and discuss which manager will get the bonus : The clothing division has P 1,000,000 of current liabilities while the cosmetics division has only P 400,000 of current liabilities. Calculate EVA
How much is the total income to be reported in gross income : Mang Jose has several interests in various businesses and partnerships. How much is the total income to be reported in gross income
What the sunk cost associated with this decision situation : John therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. What the sunk cost associated with this decision
What was the total standard cost : Assume the unit standard costs data for the beginning and ending inventories remained constant during the period. What was the total standard cost
Estimate the expected rate of return : Estimate the expected rate of return from investing in SSG, assuming the rate of dividend growth reverts to its long-run average of 4.0% per annum after 2024
What is the present value : Your company will generate $79,000 in annual revenue each year for the next seven years from a new information database. What is the present value
Describe the annualized returns : Describe the annualized returns, standard deviations, and beta for your portfolio and the S&P 500 Index. What does the standard deviation indicate
What was campus bagels margin of safety : Management plans on selling each bagel sandwich for $4. For the most recent year (with just the bagel sales), what was Campus Bagels' Margin of Safety
What will be the highest contribution margin : SimplengTaksil Company produces furniture. It has four products, tables, chairs, cabinets and bookshelves. What will be the highest contribution margin

Reviews

Write a Review

Financial Accounting Questions & Answers

  Standard materails cost

Management has determinined that each medium-sized box has a standard materails cost of $1.20 when 4 pounds of raw materail at a cost of .30 per pound are used

  Determine faulkner taxable income

Prepare schedule (similar to those on Slide 30 in 3352-ppt18 Chapter 18) to show of all the taxable/deductible temporary (timing) differences

  What spot price level of silver will a margin call occur

Suppose that you enter the initial margin is Rs. 4000 & the maintenance margin is Rs. 3000. At what spot price level of silver will a margin call occur?

  What should bernie pay for each bike

If the manufacturer's list price is $470, what should Bernie pay for each bike if he orders 110 bikes at a time, assembles the bikes, and displays and advertise

  Developed schedule of future taxable and deductible amounts

Nadal Inc. has two temporary differences at the end of 2006. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Nadal's accounting department has developed a schedule of future taxabl..

  Prepare a data flow diagram of expenditure cycle procedures

The company has a centralized computer system with terminals located in various departments. Prepare a data flow diagram and a system flowchart of the expenditure cycle procedures previously described.

  Explain the generally accepted accounting principles

Explain what accountants are generally referring to when they talk about financial reporting and explain the generally accepted accounting principles (GAAP).

  Component of a company internal control system

The control environment is a component of a company's internal control system that:

  Find what is project equivalent annual cost

Find what is project's equivalent annual cost, or EAC? depreciated over the life of the project and has no salvage value. If the required return is 11 percent.

  What benefits can flow from processing sales details

What benefits can flow from processing sales details on a computer?- What are the legal principles underlying the protection of personal information kept on computers?

  What is the balance in unearned revenue at the end

What is the balance in Unearned Revenue at the end of February - statements is true of the effect of these transactions on Sarah, Capital

  Calculate the projected cash receipts

Calculate the projected Cash Receipts for the three months of February, March, and April and Calculate the projected Cash Disbursements for the same months

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