Question
1. ABC, Inc. is expected to pay an annual dividend per share of $2.80, and investors require a rate of return on S&P500 index is
1. ABC, Inc. is expected to pay an annual dividend per share of $2.80, and investors require a rate of return on S&P500 index is 12%, with the T-bill rate at 6%. What should be the current share price of ABC's stock if ABC's beta is 1.7, with a growth rate of 5%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2.
If firm A has a higher plowback ratio than firm B, then firm A will tend to have ___________ P/E ratio than firm B, other things being equal.
Multiple Choice
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a lower
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a higher
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an unchanged
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The answer cannot be determined from the information given.
3.
A preferred stock will be worth ______________ today if it is expected to pay a fixed amount of $6 dividend per share every year, and investors require a return of 7% on this preferred stock.
Multiple Choice
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$65.50
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$85.71
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$114.29
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$33.50
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