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Constant growth valuation
Thomas Brothers is expected to pay a $1.3 per share dividend at the end of the year (that is, D1 = $1.3). The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 13%. What is the stock's current value per share? Round your answer to two decimal places. $
Assume that the risk-free rate is 6.5% and the required return on the market is 10%. What is the required rate of return on a stock with a beta of 1.4?
Explain the theory behind the free cash ?ows valuation approaches. Why are free cash ?ows value-relevant to common equity shareholders when they are not cash ?ows to those shareholders but rather are cash ?ows into the ?rm?
Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?
In 2014, stock ABC pays $0.80 per share quarterly dividend and the dividend was $0.50 per share in 2008. The growth rate is 5.0%. Find the beta for stock ABC. Find the current interest rate on a 6-month treasury bill. Calculate the expected return fo..
You are the CEO of a company that has hired a new sales manager in the last year. The company’s sales have increased by 60 percent during that time; however, the company’s average collection period has increase from twelve days to thirty-five days. I..
Summarize the arguments for and against local school districts being required to finance their own school construction, regardless of their taxable wealth.
A semiannual 10% coupon bond that matures in 40 years has a current price of $800. What is its yield to maturity?
The stock price of Tomboy, Inc. is $58.78. Investors require a 8.6 percent rate of return on similar stocks. If the company plans to pay a dividend of $3.14 next year, what growth rate is expected for the company’s stock price?
Obtain the required information about GE’s industrial cash flow from operating activities using the annual reports of GE for the years 2011 thru 2014. Based on the data you obtained in (b) above, state whether the cumulative industrial cash flow from..
A firm has common stock with a market price of $35 per share and an expected dividend of $4.50 per share at the end of the coming year. The growth rate in dividends has been 5 percent. The cost of the firm's common stock equity is
You expect to receive $41,000 at graduation in two years. You plan on investing it at 9.25 percent until you have $176,000. Required: How long will you wait from now? (Enter rounded answer as directed, but do not use rounded numbers in intermediate c..
Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.50%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.6% versus zero on T-bonds, and the ..
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