Nguyen Khanh Son- Finance-chapter 9

Nguyen Khanh Son- Finance-chapter 9 - Name: Nguyen Khanh...

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

View Full Document Right Arrow Icon
Name: Nguyen Khanh Son Class: Batch 2 Chapter 9 Questions: 9.3 It depends on the company has good investment opportunities in the future or not, if the company has good investment opportunities in the future, the company should retain more earnings (pay less current dividends). 9-4 When two investors agree to buy GE’s stock with the same dividend and grow rate We have D 01 = D 1 /(1+g) 2 and D 02 = D 1 /(1+g) 10 When number of years increase, D 0 will decrease so apply this formula: P = D/r ; P also decrease so the investor hold GE’s stock should buy stocks with lower prices Problems: 9-1 Dividend = D 0 = $ 1.5 g 1 = 7% N = 3 years g 2 = 5% We have: D 0 = $1.5 D 1 = D 0 (1+g 1 ) = 1.5 (1+ 0.07) = 1.605 D 2 = D 0 (1+g 1 ) 2 = 1.5 (1+ 0.07) 2 = 1.71735 D 3 = D 0 (1+g 1 ) 3 = 1.5 (1+ 0.07) 3 = 1.8376 D 4 = D 0 (1+g 2 ) = 1.5 (1+ 0.07) = 1.9294 D 5 = D 0 (1+g 2 ) 2 = 1.5 (1+ 0.07) 2 = 2.0259 9-2 D 1 = $ 0.5 g = 7% r = 15% We have: P 0 = D 1 / r-g = 0.5 / (0.15-0.07) = $ 6.25 9-4 D0 = $ 1.25 g 1 = 20% N = 2 years
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/23/2011 for the course MANAGEMENT 101 taught by Professor Nguyen during the Spring '11 term at Troy.

Page1 / 2

Nguyen Khanh Son- Finance-chapter 9 - Name: Nguyen Khanh...

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

View Full Document Right Arrow Icon
Ask a homework question - tutors are online