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The stock of Nogro Corporation is currently selling for $30 per share. Earnings per share in the coming year are expected to be $6. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? (Do not round intermediate calculations.) Rate of return % b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? PVGO $ c-1. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Stock price would be decreased Stock price would be unaffected Stock price would be increased c-2. If Nogro eliminated the dividend, what would happen to its stock price? Stock price would be unaffected Stock price would be increased Stock price would be decreased.
Julia Price Wants to Drive a BMW It has been almost 15 years since Julia graduated with a major in aeronautical engineering, and now she makes “buckets of money” working as a project manager for a large defence contracting company. While she is not v..
What is the amount of bid using Options contract and how much of the revenue is exposed and what is the amount of bid using Borrowing and Lending
Please explain why the current book value of the capital structure is likely to be different than a company's target capital structure? Also, give the differences between current book value of the capital structure and a company’s target capital stru..
A portfolio is comprised of three index funds: an equity index comprising 40% of the total portfolio, a bond index comprising 30% of the total portfolio and an international index comprising 30% of the total portfolio. After each quarter the portfoli..
Year-to-date, Oracle had earned a −1.53 percent return. During the same time period, Valero Energy earned 8.07 percent and McDonald's earned 0.70 percent. If you have a portfolio made up of 25 percent Oracle, 30 percent Valero Energy, and 45 percent ..
Explain how and why profitability ratios at small banks typically differ from those at the largest money center banks.
A firm has total assets of $150 million, liabilities of $90 million, and a return on assets of 8%. What is the return on equity? A company’s stock is trading at $35 a share. The company has a P/E ratio of 16, and pays $0.30 in dividends per share. Wh..
A bond has a par value of $1000 and a coupon rate of 8%, which is paid annually. The maturity of the bond is four years and the coupon payments are reinvested at the current rates listed below. The required rate of return is 6 percent. What is the bo..
What is a budget deficit? How are budget deficits financed? Why do Keynesians believe that budget deficits will increase aggregate demand?
Suppose your retirement account has a balance today of $25,000 and you are 20 years old. If you are invested in a diversified portfolio of stocks, you might hope that the historical return of about 6% continues into the future. Compute the balance in..
Trevor Co.'s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding, what will the yearly dividend per share be if the dividend policy is Trevor & Co. 1 $ 900,000 2 1,200,000 3 850,000 4 1,350,000 a..
Three put options on a stock have the same expiration date and strike prices of $55, $60, and $65. The option prices are $3, $8, and $12, respectively. How should an arbitrager take advantage of the arbitrage opportunity if it exists? (Hint: Examine ..
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