Corporate Finance and Stocks

Corporate Finance and Stocks - The answers are marked in...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: The answers are marked in Bold 1. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 12.5%, and the expected constant growth rate is g = 8.5%. What is the current stock price? a. $17.82 b. $18.28 c. $18.75 d. $19.22 e. $19.70 2. If D1 = $1.50, g (which is constant) = 6.5%, and P0 = $56, what is the stocks expected capital gains yield for the coming year? a.6.50% b. 6.83% c. 7.17% d. 7.52% e. 7.90% 3. McDonnell Manufacturing is expected to pay a dividend of $1.50 per share at the end of the year (D1 = $1.50). The stock sells for $34.50 per share, and its required rate of return is 11.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? a. 6.46% b. 6.63% c. 6.80% d. 6.97% e. 7.15% 4. The Zumwalt Company is expected to pay a dividend of $2.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock 5....
View Full Document

This note was uploaded on 06/12/2011 for the course BUS 5441 taught by Professor B during the Winter '10 term at FIT.

Ask a homework question - tutors are online