1. You expect KStreet Co's trade at $95 per share right after paying a $2.25 dividend per share in one year. What is the most you would pay to buy the stock now if you want to earn at least a return of 13%? The most you would pay to buy the stock is $ (Round to the nearest cent.) 2. Use the data for Starbucks (SBUX) and Google (GOOG) 1 to answer the following questions: a. What is the return for SBUX over the period without including its dividends? With the dividends? b. What is the return for GOOG over the period? c. If you have 31% of your portfolio in SBUX and 69% in GOOG, what was the return on your portfolio excluding dividends? a. What is the return for SBUX over the period without including its dividends? The return without the dividends is %. (Round to two decimal places.) With the dividends? The return with the dividends is %. (Round to two decimal places.) b. What is the return for GOOG over the period? The return is %. (Round to two decimal places.) c. If you have 31% of your portfolio in SBUX and 69% in GOOG, what was the return on your portfolio excluding dividends? The return of the portfolio is %. (Round to two decimal places.)
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In this case, we have a dividend of $2.25 per share in one year. To calculate the present value, we need to discount the future cash flows using an appropriate discount rate. Let's assume a discount rate of 10%. PV = Dividend / (1 + r) PV = $2.25 / (1 + 0.10) PV Show more…
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Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $3.60 on its common stock in a single annual installment, and management plans on raising this dividend by 3.4 percent per year, indefinitely. If the required return on this stock is 10.5 percent, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.90 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year dividend for each year.) Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Current share price b. Current share price
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Text: Problem 3-12 Suppose that you sell short 250 shares of Xtel, currently selling for $100 per share, and give your broker $15,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $115; (ii) $100; (iii) $95? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how high can Xtel's price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
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