Answered: XYZ Co. will pay a $4.20 per share…

XYZ Co. will pay a $4.20 per share dividend on common stock at the end of the year. The Ke = 11.8%. The g = 6.8%. Compute the current price of the stock.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 2P

See similar textbooks

Related questions

Q: John needs £1,000 in 6 years' time, how much must he deposit into a bank account that pays 6.6388%…

A: The amount deposited in the beginning will earn interest. Subsequent years, the initial deposit and…

Q: Dee's made two announcements concerning its common stock today. First, the company announced that…

A: Next dividend (D1) = $2.29 Growth rate (g) = 0.0133 Discount rate (r) = 0.125 Value of the stock =…

Q: or what reason might a company purchase treasury stock? To increase shareholder liquidity To…

A: Treasury shared means purchasing own shares of company.

Q: LO 2 5. Coupon Rates. Barnes Enterprises has bonds on the market making annual payments, with 12…

A: Solution:- Bond price means the price at which a bond is trading in the market. It is the summation…

Q: Empirical evidence suggests that IPO issues are generally: priced efficiently by the market.…

A: Empirical evidence refers to teh information that is obtained after the observation and the…

Q: a) Assume the euro's spot price at the expiration date (market price) is *123/€ The investor's…

A: A put option starts making profit when the spot price at expiry is below the strike price. The value…

Q: Use the following amortization chart: Selling price of home Down payment Principal (loan) Rate of…

A: The question is related to Interest Cost. The Interest cost is calculated with the help of following…

Q: Stock Repurchase A firm has 20 million shares outstanding with a market price of $20 per share. The…

A: concept. Stock Repurchase means buyback or repurchase of the shares by the company. On repurchase…

Q: Suppose that the current 6-month, 1-year, 1.5-year and 2-year interest rates are 2.2%, 3%, 3.5% and…

A: Table for spot rates with different maturities Time to maturity spot rate 6 months 2.2% 1…

Q: 27. You have developed the following data on three stocks: Stock Standard Deviation Beta A 0.15 0.79…

A: Risk The possibility of losing money on an investment is called risk. Risk exists in all types of…

Q: Aranufacturer of video games develops a new game over two years. This costs $800,000 per year with…

A: NPV is used to measure the profitability of a project. It discounts all future cash flows to…

Q: If the 5-year spot rate is 10% and the 4-year spot rate is 9%, what is the one-year forward rate of…

A: Concept. FR = ( 1+ Ra)Ta( 1+ Rb)Tb - 1 Where , FR = forward rate Ra = spot rate for year / time…

Q: Delta Plc is considering investing in bespoke software solutions, which requires an initial…

Q: John purchases a $600 bond that has 6 remaining semi-annual 7% coupon payments for $510. What would…

A: The Par Value of the Bond is $600 The remaining payments are 6 The coupon rate is 7% Price of the…

Q: Pablo Company is considering buying a machine that will yield Income of $2,700 and net cash flow of…

A: Net Present Value(NPV) The difference between cash that flows in and out of a project is known as…

Q: unt balance of $10,000 after 5 years, what amount do you need to invest initially into an account…

A: More is compounding than more is the effective interest rate and hence more will be the future value…

Q: Who benefits from technical analysis, and what is its purpose? Describe how and why technicians use…

A: The technical analysis is a type of analysis by using past prices and historical information for…

Q: Who benefits from technical analysis, and what is its purpose? Describe how and why technicians use…

A: Technical Analysis The analysis used to evaluate the current investment is known as technical…

Q: Use the following information to calculate the expected return and standard deviatio Doors, Inc.,…

A: Expected return on the portfolio is the weighted return of the stocks in the portfolio. Expected…

Q: 12. How will the decision to capitalize a cost instead of expensing the cost impact the Alpha X…

A: In finance in the income statement different expenses are shown. This is expensing the cost. In…

Q: daniels estimates that he will need $22,000 to set up small business in 8 years. a) how much ( in…

A: Future value of annuity includes the amount being deposited and amount of interest accumulated over…

Q: Project L requires an initial outlay at t 0 of $55,000, its expected cash inflows are $14,000 per…

A: Pay-back period It is the length of time required to recover the cost of the cash outflow. It is the…

Q: After learning how to value a stock in his Corporate Finance class, Mark Stark decided to put his…

A: Valuation of stock is done based on dividend given by the company and growth rate of dividend and…

Q: Find the compound amount for the deposit and the amount of interest earned. $6700 at 3% compounded…

A: The amount that you invest today gets compounded. This happens because compound interest is computed…

Q: Your factory has been offered a contract to produce a part for a new printer. The contract would…

A: Net Present Value (NPV) refers to one of the concepts from the modern techniques of capital…

Q: Question 7 The following information about a company is provided: Account Contributed capital,…

A: Total Liability = (Total Asset - contributed Capital - Closing balance of Retained earnings) Closing…

Q: What can be the future of Green bonds? What are the recommendations of Green bonds to make it more…

A: The green bonds are reflective of all such bonds which are used for funding various types of…

Q: nit Sales Price: $100 Unit Buying Price: $ 34 Unit Sales Premium: $ 6 Annual Rent Cost:…

A: Break even quantity is quantity where all cost are covered and there is no profit and loss situation…

Q: Find the compound amount for the following certificate of deposit. Assume daily compoundings…

A: The amount that a present investment will gain in value over time when kept in a compound interest…

Q: Sfundo Limited Sfundo Limited enters into a contract with Pro Tech Limited for the rental of a…

A: Sfundo Limited Lease payment -50000 per year Commision - 10461 Interest rate - 5%…

Q: Complete the following amortization chart by using Table 15.1. Note: Round your "Payment per…

A: Mortgage loans are paid by the equal monthly fixed payments and these are paid over the life of…

Q: Consider a 6%, 25-year bond selling to yield 9%. Its modified duration is 10.62 and convexity is…

A: The modified duration of a bond refers to the change that the price of the bond experiences for…

Q: Question 2 Novak Ltd expects its new tennis racquet will give it a significant first mover advantage…

Q: A $110,000 mortgage was amortized over 20 years by monthly repayments. The interest rate on the…

A: Mortgages are very loans because they have monthly payments over the life of the loans and monthly…

Q: You can exchange $1 for either .9102 euro or .7233 British pounds. What is the cross-rate in terms…

A: Exchange rate of €‎/$ = 0.9102 Exchange rate of £‎/$ = 0.7233 Cross rate = ?

Q: Complete the following using compound future value. (Use the Table 12.1 provided.) Note:Round your…

A: The compound future Value is calculated with the help of following formula Compound Future Value =…

Q: Recently, you made multiple large purchases on your credit card totaling $17,300. The interest rate…

A: Given The Purchases are $17300 Interest rate is 15.4%

Q: fall within what range? Between 0% and 36% Between-36% and 72% Between-18% and 54%

A: Standard deviation is the measure risk of return from the stock and how much is deviation from mean…

Q: year risk premium is estimated to be 4.8%. mate the equity cost of capital for Mackenzie. er the…

A: Dividend discount model is used to make valuation of stock based on dividend and growth of dividend…

Q: As a project manager, your task is to make decision along with the finance manager c investment…

A: Payback period is simple method of capital budgeting and in this period required to recover initial…

Q: What is the required return for each stock? What is required return for stock B? Scenario…

A: Solution:- Capital Asset Pricing Model (CAPM) is the equity model to determine the required rate of…

Q: You are to create a year-by-year depreciation schedule for an asset that has a cost basis (B) of…

A: The salvage Value is $80,000 The price of the Equipment is $950,000 Project life is 10 years To…

Q: 25-Which of the following statements is correct? a. A complete probability distribution is always an…

A: Answer - Probability is how likely something is happen and purpose is to reduce the data size and a…

Q: The value of your home is $350,000. You have a first mortgage of $175,000. The banks maximum loan(s)…

A: Banks maximum loan to value ratio = 80% Maximum loan = 80%×Value of home = 0.80×$350000 = $280,000

Q: Discuss the key differences between the operation of a currency forward market and a futures…

A: Foreign exchange, also known as Forex or FX, is the process of converting one currency into another…

Q: You lend a friend $800 and they agree to make quarterly payments for 1 year. You charge your friend…

A: Loans are paid by equal periodic payments and these payments carry the payment of interest and…

Q: QUESTION 10 A Private Joint Stock Company must allocate 15% of its net profit each year to create a…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Cello Corporation is considering an investment in new equipment. An analysis by management indicates…

A: The Net present value is the net value added to the company by a certain project. It is the…

Q: B 2. Deposits of $6000 are made every 6 months into a fund starting today and continuing until 10…

A: Semi-annual deposit amount = $6000 Future value of deposit = $70630 Number of periods = 10 Rate of…

Q: A coal distributor buys a coal futures contract that requires acceptance of 46,000 tons of coal at…

Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

XYZ Co. will pay a $4.20 per share dividend on common stock at the end of the year. The Ke = 11.8%. The g = 6.8%. Compute the current price of the stock.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Ratio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?
A preferred stock from Duquesne Light Company pays $3.55 in annual dividends. If the required return on the preferred stock is percent, whats the 6.7%, what's the value of the stock?
North Side Corp’s dividends for year 1, year 2, year 3, and expected share price for year 3 are: D1=$1.95, D2=$2.10, D3=$2.18, and P3=$95 respectively. What is the company’s current share price given the required return of 8 percent?
A common stock pays an annual dividend per share of $2.10. The market capitalization rate (required return on equity) is 11.5%. If the annual dividend is expected to remain at $2.10, what is the value of the stock? Round your answer to two decimal places.
The preferred stock of Axim Corp. is currently selling at $51.07. If the required rate of return is 11.7 percent, what is the dividend paid by this stock? (Round answer to 2 decimal places, e.g. 15.25.) Dividend paid $ ________
A preferred stock from DLC pays $3.00 in annual dividends. If the required return on the preferred stock is 9.3 percent, what is the value of the stock?
A preferred stock from Duquesne Light Company (DQUPRA) pays $3.55 in annual dividends.If the required return on the preferred stock is 6.7 percent, what’s the value of the stock? (Round your answer to 2 decimal places.)
A stock is bought for $23.25 and sold for $28.69 a year later, immediately after it has paid a dividend of $4.18. What is the capital gain rate for this transaction? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign. A stock is bought for $29.45 and sold for $35.96 a year later, immediately after it has paid a dividend of $3.97. What is the dividend yield for this transaction? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign. You own a portfolio that has $3,764 invested in Stock A and $7,514 invested in Stock B. If the expected returns on these stocks are 9.33% and 11.67%, respectively, what is the expected return on the portfolio? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign.
A stock that sold for $30 per share at the beginning of the year was selling for $78 at the end of the year. If the stock paid a dividend of $3.53 per share, what is the simple interest rate on the investment in this stock? Consider the interest to be the increase in value plus the dividend.
The Moreau Corporation is paying an annual dividend of $0.65 per share. If the price of a share of the stock is $81.25, what is the dividend yield on the stock?
The preferred stock of PAY Inc. pays an annual dividend of $3.75 and sells for $47.80 a share. What is the rate of return on this security?
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $2 per share and sells for $57. 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 $43. What are the dividend yield and percentage capital gain in this case?