Question
(Common stock valuation) Dubai Metro's stock price was at $90 per share when it announced that...
(Common stock valuation) Dubai Metro's stock price was at $90 per share when it announced that it will cut its dividend for next year from $10 per share to $6 per share, with additional funds used for expansion. Prior to the dividend cut, Dubai Metro expected its dividends to grow at a 7 percent rate, but with the expansion, dividends are now expected to grow at 10 percent. How do you think the announcement will affect Dubai Metro's stock price?
a. What is the investor's required rate of return for Dubai Metro's stock?
(Round to two decimal places.)
b. What would be the price of Dubai Metro's stock if they cut the dividend to $6?
$. (Round to the nearest cent.)
c. How do you think Dubai Metro's stock price will react to the announcement? (Select from the drop-down menu.)
If Dubai Metro were to cut the dividend, the price of the common stock will
▼
decrease.
increase.
not change.
Homework Answers
Answer #1
Not the answer you're looking for?
Similar Questions
Dubai? Metro's stock price was at ?$100 per share when it announced that it will cut...
Dubai? Metro's stock price was at ?$100 per share when it
announced that it will cut its dividend for next year from ?$10 per
share to ?$6 per? share, with additional funds used for expansion.
Prior to the dividend? cut, Dubai Metro expected its dividends to
grow at a 4 percent? rate, but with the? expansion, dividends are
now expected to grow at 7 percent. How do you think the
announcement will affect Dubai? Metro's stock? price?
Cooperton Mining just announced it will cut its dividend from $4.06 to $2.63 per share and...
Cooperton Mining just announced it will cut its dividend from
$4.06 to $2.63 per share and use the extra funds to expand. Prior
to the announcement, Cooperton's dividends were expected to grow
at a 3.2% rate, and its share price was $48.65. With the planned
expansion, Cooperton's dividends are expected to grow at a 4.6%
rate. What share price would you expect after the announcement?
(Assume that the new expansion does not change Cooperton's risk.)
Is the expansion a goodinvestment?
Cooperton Mining just announced it will cut its dividend from $4 to $2.50 per share and...
Cooperton Mining just announced it will cut its dividend from $4
to $2.50 per share and use the extra funds to expand. Prior to the
announcement, Cooperton’s dividends were expected to grow at a 3%
rate, and its share price was $50. With the new expansion,
Cooperton’s dividends are expected to grow at a 5% rate.
a. What share price would you expect after the announcement?
b. (Assume Cooperton’s risk is unchanged by the new expansion.)
Is the expansion a...
Corporate Finance I JRN Enterprises just announced that it plans to cut its dividend from $2.50...
Corporate Finance I
JRN Enterprises just announced that it plans to cut its dividend
from $2.50 to $1.50 per share and use the extra funds to expand its
operations. Prior to this announcement, JRN's dividends were
expected to grow at 4% per year and JRN's stock was trading at
$25.00 per share. With the new expansion, JRN's dividends are
expected to grow at 8% per year indefinitely. Assuming that JRN's
risk is unchanged by the expansion, what will the value...
Oswego Plumbing Works (ticker: OPW) just announced that it will cut next year's dividend, Upper D...
Oswego Plumbing Works (ticker: OPW) just announced that it will
cut next year's dividend, Upper D 1D1, from $ 2.25$2.25 to $
1.40$1.40 per share and the firm will use the extra funds to expand
operations. Prior to this announcement, OPW's dividends were
expected to grow at 55% per year and OPW's common stock was
trading at a price of $ 25.00 to $25.00 /share. With the new
expansion, OPW's dividends are expected to grow at 10% per year
indefinitely....
Common stock is trading at $45 per share The 2020 dividend has dropped to $5.00 per...
Common stock is trading at $45 per share
The 2020 dividend has dropped to $5.00 per share
Dividends are expected to grow by 15% per year in 2021, 2022,
and 2023.
The 2024 dividend is expected to be 5% higher than that of 2023,
and dividends are expected to grow at the rate of 5% p.a.
thereafter into the indefinite future
Cost of equity capital is 20%
1. valuation would you place on the company's common
stock?
2. Is the stock...
(Common stock valuation) The common stock of NCP paid $ 1.45 in dividends last year. Dividends...
(Common stock valuation) The common stock of NCP paid $ 1.45
in dividends last year. Dividends are expected to grow at an annual
rate of 5.50 percent for an indefinite number of years. a. If
NCP's current market price is $ 27.23 per share, what is the
stock's expected rate of return? b. If your required rate of
return is 7.5 percent, what is the value of the stock for you? c.
Should you make the investment? (Round to two...
Summit Systems will pay a dividend of $1.43 this year. If you expect Summit's dividend to...
Summit Systems will pay a dividend of $1.43 this year. If you
expect Summit's dividend to grow by 6.7% per year, what is its
price per share if the firm's equity cost of capital is
10.5%?
Cooperton Mining just announced it will cut its dividend from
$4.03 to $2.73 per share and use the extra funds to expand. Prior
to the announcement, Cooperton's dividends were expected to grow
at a 3.3% rate, and its share price was $49.63. With the...
1. What is the price of a share of preferred stock that has a dividend of...
1. What is the price of a share of preferred stock that has a
dividend of $3 if the cost of preferred (rp) is 15%
2. What would you pay for a share of common stock if you expect
the next dividend to be $3 and you expect to sell it in one year
for $25, assuming the cost of equity (re) is 15%.
3. MBV is a cruise line which announced that dividends are
expected to grow by 3.5...
The preferred stock of Company A pays a constant $1.00 per share dividend. The common stock...
The preferred stock of Company A pays a constant $1.00 per share
dividend. The common stock of Company B just paid a $1.00 dividend
per share, but its dividend is expected to grow at 4 percent per
year forever. Company C common stock also just paid a dividend of
$1.00 per share, but its dividend is expected to grow at 10 percent
per year for five years and then grow at 4 percent per year
forever. All three stocks have...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 11 minutes ago
asked 19 minutes ago
asked 20 minutes ago
asked 24 minutes ago
asked 45 minutes ago
asked 48 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 2 hours ago
asked 2 hours ago