Reference no: EM131878521
Investors require a 15% rate of return on Levine Company's stock (i.e., rs = 15%).
What is its value if the previous dividend was D0 = $1.75 and investors expect dividends to grow at a constant annual rate of (1) -3%, (2) 0%, (3) 6%, or (4) 11%? Do not round intermediate calculations. Round your answers to two decimal places.
(1) $
(2) $
(3) $
(4) $
Using data from part a, what would the Gordon (constant growth) model value be if the required rate of return was 15% and the expected growth rate was (1) 15% or (2) 20%? Are these reasonable results?
These results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate.
These results show that the formula does not make sense if the required rate of return is equal to or greater than the expected growth rate.
These results show that the formula makes sense if the required rate of return is equal to or less than the expected growth rate.
These results show that the formula makes sense if the required rate of return is equal to or greater than the expected growth rate.
These results show that the formula does not make sense if the expected growth rate is equal to or less than the required rate of return.
-Select-Item
Is it reasonable to think that a constant growth stock could have g > rs?
It is not reasonable for a firm to grow indefinitely at a rate higher than its required return.
It is reasonable for a firm to grow indefinitely at a rate higher than its required return.
It is not reasonable for a firm to grow even for a short period of time at a rate higher than its required return.
It is not reasonable for a firm to grow indefinitely at a rate lower than its required return.
It is not reasonable for a firm to grow indefinitely at a rate equal to its required return.
|
Explain interest rate parity
: The U.S. dollar deposit interest rate is 1%, Explain Interest Rate Parity. What should be 1-year forward exchange rate for AUD/USD under Interest Rate Parity.
|
|
Explain covered interest arbitrage
: Explain Covered Interest Arbitrage. What’s will be the arbitrage profit in 6 months for 1,000,000 Euro using Covered Interest Arbitrage?
|
|
Arbitrage profit assuming triangle arbitrage is possible
: What is Cher’s arbitrage profit assuming a triangle arbitrage is possible?
|
|
How would a firm with fixed-rate debt
: How would a firm with fixed-rate debt, that expect interest rate to fall, use a swap? Please explain.
|
|
Investors expect dividends to grow at constant annual rate
: What is its value if previous dividend was D0 = $1.75 and investors expect dividends to grow at constant annual rate of (1) -3%, (2) 0%, (3) 6%, or (4) 11%.
|
|
Assume that the first cash flow will occur one year
: Assume that the first cash flow will occur one year from today (that is, at t = 1).
|
|
What is the bond nominal yield to maturity
: What is the bond's nominal yield to maturity? Would an investor be more likely to earn the YTM or the YTC?
|
|
You repay the loan by making three annual payments
: You borrowed some money at 8 percent per annum. You repay the loan by making three annual payments of $ 118
|
|
Compute the present value of annuity
: Compute the present value of an annuity of $ 884 per year for 20 years, given a discount rate of 9 percent per annum.
|