Which stock will increase its dividend by 20% over two years?
Stock Z is a growth stock that will increase its dividend by 20.25 percent for the next two years and then maintain a constant 12.5 percent growth rate, thereafter. a.What is the dividend yield for each of these four stocks?
How do you calculate the required return on constant growth?
Using the constant growth model, we can solve the equation for R. Doing so, we find: R= (D1/P0) + R= [$0.44 (1 + .035) / $14.53] + .035 R= .0663, or 6.63% The required return depends on the company and the industry. As we will see in a later chapter, this required return appears to be low relative to historic stock returns.g
How to learn financial analysis?
To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below: 1 Investing: A Beginner’s Guide#N#Investing: A Beginner's Guide CFI's Investing for Beginners guide will teach you the basics of investing and how to get started. Learn about different strategies and techniques for trading, and about the different financial markets that you can invest in. 2 Discount Factor#N#Discount Factor In financial modeling, a discount factor is a decimal number multiplied by a cash flow value to discount it back to the present value. 3 Market Risk Premium#N#Market Risk Premium The market risk premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets. 4 Return on Equity (ROE)#N#Return on Equity (ROE) Return on Equity (ROE) is a measure of a company’s profitability that takes a company’s annual return (net income) divided by the value of its total shareholders' equity (i.e. 12%). ROE combines the income statement and the balance sheet as the net income or profit is compared to the shareholders’ equity.
What is required rate?
The required rate is commonly used as a threshold that separates feasible and unfeasible investment opportunities. The general rule is that if an investment’s return is less than the required rate, the investment should be rejected.
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