A rise in the growth rate in the Gordon growth model for equity valuation will:
Lower the current P/E ratio for the stock.
Lower the prospective P/E ratio for the stock.
Lower the price of the stock.
Increase the current P/E ratio for the stock.
Reduce the required rate of return on stock.
If Unique Enterprises has a current Price/Earnings ratio (based on historic earnings) of 10.0, the most recent Dividend was 20p, the Dividend Payout ratio is 40%, and the earnings growth rate is expected to be 12% per annum, what is the expected annual incremental return over the current risk-free rate of 8.00%?
6.25%
7.14%
8.12%
8.48%
9.62%
If Rutterford Enterprises has a current price-earnings ratio (based on historic earnings) of 20.0 ; the most recent dividend was 30p ; the dividend payout ratio is 30%; and the earnings growth rate is expected to be 12% per annum, what is the expected annual incremental return over the current risk free rate of 6%.
6.00%
5.00%
6.68%
7.32%
7.68%
ABC Inc is currently priced at $45 per share, and the most recent annual dividend payment was $2.50. Assuming a dividend payout ratio of 40 percent, an earnings growth rate of 8%, and a required rate of return on the stock of 14%, what do you expect the price of the stock to be in two years time? (rounded to the nearest quarter)
51 ½
52
52 ¼
52 ½
53
Mackenzie Enterprises has a historic price / earnings ratio of 15. If next year’s dividend is expected to be 10p, the dividend payout ratio is 50% and the growth rate is expected to be 7% per annum. What is the expected rate of return on the stock.
10.04%
10.37%
10.57%
10.96%
11.82%
A UK right issue involves:
An auction of new shares to all investors
A fixed price tender offer to all investors
The repurchase of shares from existing stockholders at a fixed price
The issue of new shares pro rata to existing stockholders