Sunshine corporation is expected to pay a dividend of

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62. Sunshine Corporation is expected to pay a dividend of $1.50 in the upcoming year.Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 6%and the expected return on the market portfolio is 14%. The stock of Sunshine Corporationhas a beta of 0.75. The intrinsic value of the stock is _______.A.$10.71B.$15.00C.$17.75D.$25.00E.none of the above6% + 0.75(14% - 6%) = 12%; P = 1.50 / (.12 - .06) = $25.
Difficulty: Moderate18-25
Chapter 18 - Equity Valuation Models63. Low Tech Chip Company is expected to have EPS in the coming year of $2.50. Theexpected ROE is 14%. An appropriate required return on the stock is 11%. If the firm has adividend payout ratio of 40%, the intrinsic value of the stock should be
64. What is the market capitalization rate for Risk Metrics?
Difficulty: Moderate18-26
Chapter 18 - Equity Valuation Models65. What is the approximate beta of Risk Metrics's stock?
Difficulty: Difficult66. The market capitalization rate on the stock of Flexsteel Company is 12%. The expectedROE is 13% and the expected EPS are $3.60. If the firm's plowback ratio is 50%, the P/Eratio will be _________.A.7.69B.8.33C.9.09D.11.11E.none of the aboveg = 13% X 0.5 = 6.5%; .5/(.12 - .065) = 9.09
Difficulty: Difficult67. The market capitalization rate on the stock of Flexsteel Company is 12%. The expectedROE is 13% and the expected EPS are $3.60. If the firm's plowback ratio is 75%, the P/Eratio will be ________.
Difficulty: Difficult18-27
Chapter 18 - Equity Valuation Models68. The market capitalization rate on the stock of Fast Growing Company is 20%. Theexpected ROE is 22% and the expected EPS are $6.10. If the firm's plowback ratio is 90%,the P/E ratio will be ________.
Difficulty: Difficult69. J.C. Penney Company is expected to pay a dividend in year 1 of $1.65, a dividend in year2 of $1.97, and a dividend in year 3 of $2.54. After year 3, dividends are expected to grow atthe rate of 8% per year. An appropriate required return for the stock is 11%. The stock shouldbe worth _______ today.
Difficulty: Difficult18-28
Chapter 18 - Equity Valuation Models

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Term
Summer
Professor
Dalilie
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