{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# chp05-cevap - CHAPTER 5 VALUING STOCKS 1 A stock paying \$5...

This preview shows pages 1–2. Sign up to view the full content.

CHAPTER 5- VALUING STOCKS 1. A stock paying \$5 in annual dividends sells now for \$80 and has an expected return of 14%. What might investors expect to pay for the stock one year from now? A) \$82.20 B) \$86.20 C) \$87.20 D) \$91.20 Answer: B Difficulty: Medium Page: 139, 1st paragraph. Expected return = Div 1 1 o o + - P P P 14% = \$5 \$80 \$80 1 + - P \$11.20 = P 1 – \$75 \$86.20 = P 1 2. What should be the price for a common stock paying \$3.50 annually in dividends if the growth rate is zero and the discount rate is 8%? A) \$22.86 B) \$28.00 C) \$42.00 D) \$43.75 Answer: D Difficulty: Medium Page: 144, 1st paragraph. P o = Div r = = 3.50 .08 \$43.75 3. What constant growth rate in dividends is expected for a stock valued at \$32.00 if next year’s dividend is forecast at \$2.00 and the appropriate discount rate is 13%? \$32.00 = 2.00 .13 - g \$4.16 – 32 g = \$2.00 \$2.16 = 32 g .0675 = g 6.75% = g

This preview has intentionally blurred sections. Sign up to view the full version.

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

{[ snackBarMessage ]}

### Page1 / 3

chp05-cevap - CHAPTER 5 VALUING STOCKS 1 A stock paying \$5...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online