Question

why should the rate of return on a stock this period be equal to its dividend...

why should the rate of return on a stock this period be equal to its dividend yield period plus the perpetual growth rate of dividends?

  • why do we buy financial assets?
  • what payoffs does a stock provide to the stockholder?
  • Where does "capital appreciation" show up in the formula k = div yield + g?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #2

Question 1

Because when we hold a stock the dividend is the pay off from the stock along with it the increase or decrease in price of share from the purchase price is also the return on the share which is shown by perpetual growth rate of dividends.

Question 2

We buy financial assets to earn future cash flows associated with such assets.

Question 3

A stock provides pay off in form of dividend to shareholders.Dividend can be cash or non-cash.

Question 4

Capital appreciation is shown in growth rate or g.

answered by: anonymous
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
Choose all correct statements. 1.Dividend growth rate is equivalent to the dividend yield. 2.The total return...
Choose all correct statements. 1.Dividend growth rate is equivalent to the dividend yield. 2.The total return on a stock is equal to the dividend yield plus the capital gains yield. 3.The benchmark PE ratio can be used to value the stock of firms that pay no dividends. 4.Assume the constant dividend growth model. An increase in the capital gains yield will increase the current value of a stock.
A stock’s required return is equal to the dividend growth rate plus the capital gains yield....
A stock’s required return is equal to the dividend growth rate plus the capital gains yield. True or false
Prove that for a stock with dividends that grow at a constant rate, the capital gains...
Prove that for a stock with dividends that grow at a constant rate, the capital gains yield equals the growth rate. (Hint: to prove the result, remember that the required rate of return is equal to the capital gains yield plus the dividend yield).
Answer the following questions regarding dividend discount models: What are the two components of most stocks’...
Answer the following questions regarding dividend discount models: What are the two components of most stocks’ expected total return? What is the general formula to calculate the capital gains yield and the dividend yield of a stock (one that holds when firm’s dividends are growing at a constant rate and when they are not)? Write out and explain the dividend discount model formula for a constant growth stock. What is the capital gains yield and dividend yields for a constant...
Using the following information to evaluate a stock price. A stock just paid its dividend of...
Using the following information to evaluate a stock price. A stock just paid its dividend of $2.00 and its required return is 13%. If the growth rate g = 0%, in other words, the dividend is constant at $2.00, what is the stock price? 837 What if g is constant and is 6%? 33.3333 What is the dividend yield and what is the capital gains yield for b? Assume g is non-constant, the growth rate is 30% for Year 0...
In practice, the use of the dividend discount model is refined from the method presented in...
In practice, the use of the dividend discount model is refined from the method presented in the textbook. Many analysts will estimate the dividend for the next 5 years and then estimate a perpetual growth rate at some point in the future, typically 10 years. Rather than have the dividend growth fall dramatically from the fast growth period to the perpetual growth period, linear interpolation is applied. That is, the dividend growth is projected to fall by an equal amount...
A stock’s required return is equal to the dividend yield plus dividend growth rate . True...
A stock’s required return is equal to the dividend yield plus dividend growth rate . True False You should always choose the investment with the highest APR (annual percentage rate) even if the number of compounding periods differs. True False As the term of a mortgage (“t”) decreases, the payment decreases, all else equal. True False Bond A is not callable, Bond B is callable. All else equal, which one will have the higher coupon payment? A B A=B
VALUATION OF A CONSTANT GROWTH STOCK Investors require a 16% rate of return on Levine Company's...
VALUATION OF A CONSTANT GROWTH STOCK Investors require a 16% rate of return on Levine Company's stock (i.e., rs = 16%). What is its value if the previous dividend was D0 = $3.50 and investors expect dividends to grow at a constant annual rate of (1) -2%, (2) 0%, (3) 7%, or (4) 13%? Do not round intermediate calculations. Round your answers to two decimal places. (1) $ (2) $ (3) $ (4) $ Using data from part a, what...
VALUATION OF A CONSTANT GROWTH STOCK Investors require a 17% rate of return on Levine Company's...
VALUATION OF A CONSTANT GROWTH STOCK Investors require a 17% rate of return on Levine Company's stock (i.e., rs = 17%). What is its value if the previous dividend was D0 = $2.50 and investors expect dividends to grow at a constant annual rate of (1) -4%, (2) 0%, (3) 5%, or (4) 11%? Do not round intermediate calculations. Round your answers to two decimal places. (1) $ (2) $ (3) $ (4) $ Using data from part a, what...
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The...
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The dividends are expected to grow at a constant rate of 3 percent per year, indefinitely. If investors require a 12 percent return on Courageous stock, what is the current price? What will the price be in 3 years? In 15 years? PART A: Current Price: $____________. PART B: Price in Three Years: $____________. PART C: Price in Fifteen Years: $____________. #4 Stock Values The...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT