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Chapter9 Q2 Q3 Q5 Q9

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Chapter 9

QUESTIONS AND PROBLEMS

2. Stock Values – The next dividend payment by ECY, Inc., will be $3.20 per shares. The dividends are anticipated to maintain a growth rate of 6 percent, forever. If ECY stock currently sells for $63.50 per share, what is the required return?

3. Stock Values – For the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?

5. Stock Valuation – Siblings, Inc., is expected to maintain a constant 6.4 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.3 percent, what is the required return on the company’s stock?

9. Growth Rate – The newspaper reported last week that Bennington Enterprises earned $34 million this year. The report also stated that the firm’s return on equity is 16 percent. Bennington retains 80 percent of its earning. What is the firm’s earnings growth rate? What will next year’s earnings be?

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