Question
Computer stocks currently provide an expected rate of return of 18%. MBI, a large computer company, will pay a year-end dividend of $2.30 per share.
Computer stocks currently provide an expected rate of return of 18%. MBI, a large computer company, will pay a year-end dividend of $2.30 per share.
A. If the stock is selling at $53 per share, what must be the market's expectation of the growth rate of MBI dividends?
b-1. If dividend growth forecasts for MBI are revised downward to 7% per year, what will happen to the price of MBI stock?
The price will fall.
The price will rise.
What (qualitatively) will happen to the company's price-earnings ratio?
The price-earnings ratio will fall.
The price-earnings ratio will rise.
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Fundamentals of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
5th edition
205989756, 978-0205989751
