Answer:
required return = 9.32 %
Explanation:
given data
dividend payment = $3.30 per share
growth rate of 2.75 %
stock currently sells = $50.20 per share
to find out
required return
solution
we will apply here required return formula that is express as
required return = + g
here D is dividend at the end of year i.e 3.30 and p is price at the beginning i.e. 50.20 and g is growth rate of 2.75%
so put all these value we get
required return = + g
required return = +2.75%
required return = 6.57% + 2.75%
required return = 9.32 %
Answer:
P1 = 131.6566627 rounded off to $131.66
Explanation:
To calculate the price of the stock at the end of the year or P1, we first need to determine the required rate of return on the stock and the growth rate in dividends.
The required rate of return can be found using the CAPM equation. The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on market
r = 0.06 + 1 * (0.18 - 0.06)
r = 0.18 or 18%
Now we assume that the stock is a constant growth stock which means that the growth in dividends is expected to be constant throughout. The price of such a stock is found using the constant growth model of DDM. The formula for price today under the constant growth model is,
P0 = D1 / (r - g)
Where,
- D1 is expected dividend for the next period
- g is the growth rate in dividends
Plugging in the available variables, g is,
120 = 10 / (0.18 - g)
120* (0.18 - g) = 10
21.6 - 120g = 10
g = (10 - 21.6) / -120
g = 0.096667 or 9.6667% rounded off to 9.67%
So to calculate the price at the end of the year or P1, we will use D2.
P1 = 10 * (1+0.0967) / (0.18 - 0.0967)
P1 = 131.6566627 rounded off to $131.66
Investing money is always good when the stock market is good
Answer:
Polk Company
In its 2008 financial statements, Polk's 2008 earnings per common share should be:
= $1.42.
Explanation:
a) Data and Calculations:
December 31, 2007
Common stock outstanding = 300,000 shares
5%,Cumulative preferred stock outstanding, $100 par value = 10,000 shares
January 30, 2008 Stock dividend on common stock = 100% = 300,000 shares
Common stock outstanding = 600,000 shares
Net income for 2008 = $950,000
Cumulative preferred stock dividends:
2007 = $50,000
2008 = 50,000
Total = $100,000
Earnings for common stockholders = $850,000
Earnings per common share = $1.42
Answer:
D. Shortages abound due to the fact that the government cannot rely on good information.