Question
1. You are considering acquiring shares of stock that you would like to hold for one year. On a per-share basis, you expect to receive
1. You are considering acquiring shares of stock that you would like to hold for one year. On a per-share basis, you expect to receive $1.64 in dividends and $28.6 from the sale of the share at the end of the year. If you want to earn an 12.1% rate of return, what is the maximum price you would pay for a share today?
2. Git, Inc. is expected to have EPS in the upcoming year of $7.1. The expected ROE is 10.7%. An appropriate required return on the stock is 12.8%. If the firm has a plowback ratio of 72%, what is the expected dividend in the upcoming year?
3. The market capitalization rate on the stock of Funky Asphalt, Inc. is 9.4%. Its expected ROE is 13.2% and its expected EPS is $7.6. If the firm's plow-back ratio is 54%, what is the expected P/E ratio?
4. A preferred share of Xubuntu Corporation will pay a dividend of $9 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 11% on this stock. Using the dividend discount model to calculate the intrinsic value, how much is this stock worth?
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