School

California State University, Fullerton **We aren't endorsed by this school

Course

FIN 320

Subject

Finance

Date

Nov 13, 2023

Type

Other

Pages

2

Uploaded by lalocti007 on coursehero.com

10/15/23,
1:28
PM
Chapter
7
Homework-Everardo
Navarro
Student:
Everardo
Navarro
Instructor:
Erdem
Ucar
Date:
10/15/23
Course:
FIN320_54_Fall_2023
Assignment:
Chapter
7
Homework
1.
If
you
own
11,000
shares
of
stock
of
Nike
and
it
pays
a
dividend
of
$0.23
per
share,
then
what
is
the
total
dividend
you
will
receive?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
The
total
dividend
that
you
will
receive
is
$
2530
.
(Round
to
the
nearest
dollar.)
2.
Assume
Evco,
Inc.
has
a
current stock
price
of
$53.61
and
will
pay
a
$2.05
dividend
in
one
year;
its
equity
cost
of
capital
is
12%.
What
price
must
you
expect
Evco
stock
to
sell
for
immediately
after
the
firm
pays
the
dividend
in
one
year
to
justify
its
current
price?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
We
can
expect
Evco
stock
to
sell
for
$
57.99
.
(Round
to
the
nearest
cent.)
3.
Achi
Corp.
has
preferred
stock
with
an
annual
dividend
of
$3.12.
If
the
required
return
on
Achi's
preferred
stock
is
7.8%,
what
is
its
price?
(Hint:
For
a
preferred
stock,
the
dividend
growth
rate
is
zero.)
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
Achi's
stock
price
will
be
$
40.00
.
(Round
to
the
nearest
cent.)
4.
Ovit,
Inc.
has
preferred
stock
with
a
price
of
$18.01
and
a
dividend
of
$1.53
per
year.
What
is
its
dividend
yield?
Review
Only
1
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
The
dividend
yield
is
8.50
%.
(Round
to
two
decimal
places.)
1:
Review
Worked
Solution
(Formula
Solution)
To
calculate
the
dividend
yield,
use
the
following
formula:
Div,
Dividend
Yield
=
P_o
Therefore,
Dividend
Yield
=
$18.01
=0.0850=8.50%
The
dividend
yield
is
8.50%.
5.
Krell
Industries
has
a
share
price
of
$22.38
today.
If
Krell
is
expected
to
pay
a
dividend
of
$0.99
this
year
and
its
stock
price
is
expected
to
grow
to
$24.06
at
the
end
of
the
year,
what
is
Krell's
dividend
yield
and
equity
cost
of
capital?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
The
dividend
yield
is
4.4
%.
(Round
to
one
decimal
place.)
The
capital
gain
rate
is
7.5
%.
(Round
to
one
decimal
place.)
The
total
return
is
11.9
%.
(Round
to
one
decimal
place.)
6.
Summit
Systems
will
pay
a
dividend
of
$1.67
this
year.
If
you
expect
Summit's
dividend
to
grow
by
6.4%
per
year,
what
is
its
price
per
share
if
the
firm's
equity
cost
of
capital
is
10.2%?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
The
price
per
share
is
$
43.95
.
(Round
to
the
nearest
cent.)
7.
Laurel
Enterprises
expects
earnings
next
year
of
$4.45
per
share
and
has
a
40%
retention
rate,
which
it
plans
to
keep
constant.
Its
equity
cost
of
capital
is
9%,
which
is
also
its
expected
return
on
new
investment.
Its
earnings
are
expected
to
grow
forever
at
a
rate
of
3.6%
per
year.
If
its
next
dividend
is
due
in
one
year,
what
do
you
estimate
the
firm's
current
stock
price
to
be?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
The
current
stock
price
will
be
$
49.44
.
(Round
to
the
nearest
cent.)
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112

10/15/23,
1:28
PM
Chapter
7
Homework-Everardo
Navarro
8.
Which
of
the
following
will
be
a
source
of
cash
flows
for
a
shareholder
of
a
certain
stock?
|.
Sale
of
the
shares
at
a
future
date
Il.
The
firm
in
which
the
shares
are
held
paying
out
cash
to
shareholders
in
the
form
of
dividends
lll.
The
firm
in
which
the
shares
are
held
increasing
the
total
number
of
shares
outstanding
through
a
stock
split
~A.
lonly
.
B.
llonly
'¥C.
land
|l
.
D.
lland
Il
9.
Afirm
can
either
pay
its
earnings
to
its
investors,
or
it
can
keep
them
and
reinvest
them.
¥
True
False
10.
Which
of
the
following
is
NOT
a
way
that
a
firm
can
increase
its
dividend?
'
A.
by
decreasing
its
shares
outstanding
.
B.
by
increasing
its
dividend
payout
rate
.
C.
by
increasing
its
earnings
(net
income)
"¥D.
by
increasing
its
retention
rate
11.
Which
of
the
following
statements
is
FALSE?
ii]%?
A.
According
to
the
constant
dividend
growth
model,
the
value
of
the
firm
depends
on
the
current
dividend
level,
divided
by
the
equity
cost
of
capital
plus
the
grow
rate.
'
B.
Afirm
can
only
pay
out
its
earnings
to
investors
or
reinvest
their
earnings.
.
C.
Estimating
dividends,
especially
for
the
distant
future,
is
difficult.
~
D.
Successful
young
firms
often
have
high
initial
earnings
growth
rates.
12.
Spacefood
Products
will
pay
a
dividend
of
$2.40
per
share
this
year.
It
is
expected
that
this
dividend
will
grow
by
3%
per
year
each
year
in
the
future.
What
will
be
the
current
value
of
a
single
share
of
Spacefood's
stock
if
the
firm's
equity
cost
of
capital
is
9%?
MA.
$40.00
.
B.
$26.00
.
C.
$28.00
.
D.
$36.00
13.
Which
of
the
following
will
NOT
increase
a
company's
dividend
payments?
.
A.
ltcanincrease
its
earnings.
'
B.
It
can
decrease
the
number
of
shares
outstanding.
_
C.
ltcanincrease
its
dividend
payout
rate.
CQ@V
D.
It
can
issue
more
shares.
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