Reference no: EM133074381
1. A firm is expected to have earnings next year of $5.36 per share and the firm is expected to pay a dividend of $3.37. Investors' required rate of return is 12%. If the sustainable growth rate is 3.5%, what must be the rate of return earned by the firm on its new investments? Enter your answer as a percentage. Do not include the percentage sign in your answer.
2. Strawberry Co. has a stock that has a current price of $55.46. A year from now, the stock is expected to pay a dividend of $1.55 and the price will be $51.69. What is the expected rate of return for this stock? Enter your answer as a percentage. Do not include the percentage sign in your answer.
3. Shield Corp. expects an earnings per share of $2.64 and reinvests 25% of its earnings. Management projects a rate of return of 13% on new projects and investors expect a 8% rate of return on the stock.
a. What is the sustainable growth rate? Enter your answer as a percentage. Do not include the percentage sign in your answer.
b. Given a sustainable growth rate of 3.25 %, what is the price of the stock with growth? (I KEEP GETTING THIS ONE WRONG)
c. What would be the price of the stock with no growth?
3. A stock has a return on equity of 17.3% and a plowback ratio of 50%. What is the sustainable growth rate? Enter you answer as a percentage. Do not include the percentage sign in your answer.
4. Blueberry Co. has a stock that has a current price of $47.73. A year from now, the stock is expected to pay a dividend of $2.5 and the price will be $42.85. What is the expected rate of return for this stock? Enter your answer as a percentage. Do not include the percentage sign in your answer.
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: 1. A firm is expected to have earnings next year of $5.36 per share and the firm is expected to pay a dividend of $3.37. Investors' required rate of return is 1
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