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Chapter 9 - Name Nguyen Xuan Thanh Student ID 1235735...

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Name: Nguyen Xuan Thanh Student ID: 1235735 CHAPTER 9 Questions 9.3/ If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividend yield and the capital gains yield be influenced by the firm’s decision to pay more dividends rather than to retain and reinvest more of its earnings? Explain. If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. The distribution between the dividend yield and the capital gains yield should be influenced by the firm’s decision to pay more dividends rather than to retain and reinvest more of its earnings. Because if the company decides to increase payout ratio, the dividends yield component will rise, but the expected long-term capital gains yield will decline. 9.4/ Two investors are evaluating GE’s stock for possible purchase. They agree on the expected value of D1 and on the expected future dividend growth rate. Further, they agree on the riskiness of the stock. However, one investor normally holds stocks for 2 years, while the other holds stocks for 10 years. On the basis of the type of analysis done in this chapter, should they both be willing to pay the same price for GE’s stock? Explain. Two investors are evaluating GE’s stock for possible purchase. They agree on the expected value of D1 and on the expected future dividend growth rate. Further, they agree on the riskiness of the stock. However, one investor normally holds stocks for 2 years, while the other holds stocks for 10 years.
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