11 May WHAT IS THE VALUE OF A SHARE OF DIANA LTD. COMMON STOCK?
Dividends are expected to grow at a 12-percent annual rate forever. If LED’s
current market price is $40.00, and your required rate of return is 23 percent,
should you purchase the stock?A) No, the percentage return on the stock is too high, thus
it is too risky.B) Yes, the stock is expected to return more than you
require.C) No, the stock is overpriced.D) Not enough information is given. 49) Diana Ltd. paid a $2.50 per
share dividend yesterday. The dividend is expected to grow at 10 percent per
year for the foreseeable future. Diana Ltd. has a beta of 1.6, a standard
deviation of returns of 30 percent, and a required return of 18%. What is the
value of a share of Diana Ltd. common stock? 50) You are considering the
purchase of Zee Company stock. You anticipate that the company will pay
dividends of $3.50 per share next year and $4.00 per share the following year.
You believe that you can sell the stock for $20.00 per share two years from
now. If your required rate of return is 10 percent, what is the maximum price
that you would pay for a share of Zee Company stock? 51) The price of DDS Corporation
stock is expected to be $45 in 5 years. Dividends are anticipated to increase
at an annual rate of 10 percent from the most recent dividend of $1.00. If your
required rate of return is 15 percent, how much are you willing to pay for DDS
stock? Learning Objective 51) The expected rate of return implied by a given market
price equals the required rate of return for investors at the margin. 2) TC Corp paid a dividend today of $5 per share. The
dividend is expected to grow at a constant rate of 6.5% per year. If TC Corp
stock is selling for $50.00 per share, the stockholders’ expected rate of
return isA) 11.50%.B) 13.56%.C) 15.49%.D) 16.50%. 3) The expected rate of return on a share of common stock
whose dividends are growing at a constant rate (g) is which of the following,
where D1 is the next dividend and Vc is the current
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