BF 722 Chapter 13 Problems

# BF 722 Chapter 13 Problems - BF 722 Chapter 13 Problems 10...

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BF 722 Chapter 13 Problems 10. A common stock pays an annual dividend per share of \$2.10 The risk-free rate is 7% and the risk premium for this stock is 4%. If the annual dividend is expected to remain at \$2.10, what is the value of the stock? 11. The risk-free rate of return is 5%, the required rate of return on the market is 10%, and High-Flyer stock has a beta coefficient of 1.5. If the dividend per share expected during the coming year, D1, is \$2.50 and g =4%, at what price should a share sell? 13. a. Computer stocks currently provide an expected return of 16%. MBI, a large computer company, will pay a year-end dividend of \$2 per share. If the stock is selling at \$50 per share, what must be the market’s expectation of the growth rate of MBI dividends? b. If dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock? What (qualitatively) will happen to the company’s price-earnings ratio? 14.

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BF 722 Chapter 13 Problems - BF 722 Chapter 13 Problems 10...

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