title: principle of investment Suppose the dividend of a stock today is 6%. The interest rate is 5% and that dividends will grow forever at the rate of 4%. What is the fundamental value (present value) of this stock? If the current market price of this is 500, should you buy or sell the stock?
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title: principle of investment
Suppose the dividend of a stock today is 6%. The interest rate is 5% and that dividends will grow forever at the rate of 4%. What is the fundamental value (present value) of this stock? If the current market price of this is 500, should you buy or sell the stock?
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- 3. What is the intrinsic value of a share of stock if expected dividends are $8/share and the expected price year is $90/share? Assume a discount rate of 10%. What is the expected return and what should be the decision from an investor?. in 1A stock will pay a dividend of $3 and is expected to be worth $54.5 in 1 year. If the stock is currently selling for $55, what is the return? Answer as a percent. Answer:What is the rate of return if you purchase a stock today for $35 and sell it in five years for $43? Assume the stock pays an annual dividend of $2.8. Answer choices: 10.43% 12.01% 11.62% 9.79%
- What rate of return should you expect to earn on an investment in the stock described below if you bought it at its current market price? Stock A Earnings: $3.00 per share Dividend: $1.50 per share Expected growth rate: 5% Current market price: $60 per share 5.0% O 10.0% O 2.5% O7.5% Ruestion 11 How did you solve the problem above? Show your work. P Type here to search mi 75Suppose you are thinking of purchasing the SunStar’s common stock today. If you expect SunStar to pay $0.80 dividend at the end of year one and $1.6 dividend at the end of year two and you believe that you can sell the stock for $15 at that time. If you required return on this investment is 10%, how much will you be willing to pay for the stock? a. $13.95 b. $14.44 c. 14.19 d. $15.512. Answer both questions: a. You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. What is the rate of return on your investment if the year-end stock prices turn out to be $38, $40, and $42? What is your real (inflation-adjusted) rate of return in each case, assuming an inflation rate of 3%? b. Consider the following information on the returns on stock and bond investment. Scenario Profitability Stocks Bonds Recession .2 -5% +14% Normal Economy .6 +15% +8% Boom .2 +25% +4% i) Calculate the expected rate of return and standard deviation in each investment. ii) Do your results support or contradict the historical record on the relationship between risk and return in the financial market in both Canada and the United States? iii) Which investment would you prefer? Explain your answer.
- Q5. Suppose you buy a preferred stock by 50S and you receive 2S dividends forever. What is the rate of return of this investment? A) 4% B) 5% C) 3% D) 6%How much is a share of Bama Corporation stock expected to be worth one year from now, if you pay $80 per share today for this stock, the next dividend will be $4 per share, and your required rate of return on equity investment is 10%? Topic: One-period model for stock valuation; Equity Markets and Stock Valuation Question: How much is a share of Bama Corporation stock expected to be worth one year from now, if you pay $80 per share today for this stock, the next dividend will be $4 per share, and your required rate of return on equity investment is 10%? (show and label all calculations)A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $56. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? A Required What is the total rate of return for the stock? B Required What is the dividend yield and percentage capital gain? C Required Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)
- The dividend on Simple Motors common stock will be OMR3 in 1 year, OMR4.25 in 2 years, and OMR6.00 in 3 years. You can sell the stock for OMR100 in 3 years. If you require a 12% return on your investment, how much would you be willing to pay for a share of this stock today? Select one: O a. OMR77.24 O b.OMR81.52 O c. OMR91.30 O d. OMR75.45 O e. OMR85.66You are considering the purchase of preferred stock that is currently selling for $57.25 and promises an annual dividend of $4.50 dividends. What is the implied return on this investment? O 7.86% O 12.72% O 8.30% O 9.61% 11.35%Suppose you have just purchased a share of stock for $58.50. You expect a dividend next period of $2.50 which will grow at a rate of 15% indefinitely. What must your expected rate of return be on the stock you have just purchased? Select one: A. 4.27% B. 15.38% C. 19.27% D. 19.91% E. None of the above