Question

Suppose you expect Amazon to pay an annual dividend of $5 per share in the coming...

Suppose you expect Amazon to pay an annual dividend of $5 per share in the coming year, and $6 dollars in the year after that, and to trade $1750 per share at the end of the second year. If investments with equivalent risk to Amazon’s stock have an expected return of 13%, what is the most you would pay today for Amazon’s stock? What capital gain yield would you expect at this price? Select one:

a. Price = 1379.63, capital gain yield = 29%

b. Price = 1458.23, capital gain yield = 26.85%

c. Price = 1379.63, capital gain yield = 26.85%

d. Price = 1458.23, capital gain yield = 29%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose Acap Corporation will pay a dividend of $2.77 per share at the end of this...
Suppose Acap Corporation will pay a dividend of $2.77 per share at the end of this year and $2.93 per share next year. You expect​ Acap's stock price to be $50.54 in two years. Assume that​ Acap's equity cost of capital is 8.6%. a. What price would you be willing to pay for a share of Acap stock​ today, if you planned to hold the stock for two​ years? b. Suppose instead you plan to hold the stock for one...
Suppose Acap Corp will pay a dividend of $2.71 per share at the end of this...
Suppose Acap Corp will pay a dividend of $2.71 per share at the end of this year and $3.08 per share next year. You expect Acaps stock price to be $53.52 in two years. Assume that Acaps equity cost of capital us 11.5%. a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock two years? b. Suppose instead you plan to hold the stock for one year....
Suppose Acap Corporation will pay a dividend of $2.72 per share at the end of this...
Suppose Acap Corporation will pay a dividend of $2.72 per share at the end of this year and $3.07 per share next year. You expect Acap's stock price to be $50.49 in two years. Assume that Acap's equity cost of capital is 9.4%. a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years? b. Suppose instead you plan to hold the stock for one...
a. You just purchased a share of SPCC for ​$100. You expect to receive a dividend...
a. You just purchased a share of SPCC for ​$100. You expect to receive a dividend of ​$5 in one year. If you expect the price after the dividend is paid to be ​$110​, what toal return will you have earned over the​ year? What was your dividend​ yield? Your capital gain​ rate? The total return you will have earned over the year is _____%. (Round to two decimal places) b. NoGrowth Corporation currently pays a dividend of $0.42 per​...
Suppose Husqvarna AB will pay a dividend of 3.0 kr per share at the end of...
Suppose Husqvarna AB will pay a dividend of 3.0 kr per share at the end of this year and 3 kr per share next year. You expect Husqvarna’s stock price to be 56 kr in two years. If Husqvarna’s equity cost of capital is 10%: 1. What price would you be willing to pay for a share of Husqvarna stock today, if you planned to hold the stock for two years? The price is ???? kr. (round to two decimals)...
Suppose ABN Amro will pay a dividend of €1.70 per share in two years, and a...
Suppose ABN Amro will pay a dividend of €1.70 per share in two years, and a dividend of €2.00 per share in three years. You expect ABN Amro’s stock price to be €20 in three years. If ABN Amro’s equity cost of capital 8%: a. What price would you be willing to be pay for a share today if you planned to hold the stock for three years? b. Suppose instead you plan to hold the stock for two years....
The Global Market will pay an annual dividend of $1.46 per share next year. The stock...
The Global Market will pay an annual dividend of $1.46 per share next year. The stock has a current market price of $48 and a dividend growth rate of 2.4 percent. What is the dividend yield of this stock? what is capital gain yield of this stock?
Bristol-Myers Squibb Company (stock ticker is BMY) is expected pay a dividend of $1.86 per share...
Bristol-Myers Squibb Company (stock ticker is BMY) is expected pay a dividend of $1.86 per share at the end of this year and a $1.92 per share dividend at the end of the second year, you expect its stock price to be $62.10 per share. Bristol-Myers Squibb's cost of equity capital is 13% per year. a. What is the most that an investor would be willing to pay today for a share of Bristol-Meyers Squibb stock if the investor plans...
Amazon will pay a dividend of $25 per share (which is basically its current EPS), starting...
Amazon will pay a dividend of $25 per share (which is basically its current EPS), starting 5 years from today. If the discount rate is 7.5% and the estimated growth rate is 6% per year forever. What should the value of Amazon be today, using the dividend discount model. Compare this to the actual price of Amazon.
A company just paid a dividend of $0.81 per share and you expect the dividend to...
A company just paid a dividend of $0.81 per share and you expect the dividend to grow at a constant rate of 4.1% per year indefinitely into the future. If the required rate of return is 12.4% per year, what would be a fair price for this stock today? (Answer to the nearest penny per share.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT