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Question
R&D Technology Corporation has just paid a dividend of $0.50 per share. The dividends are expected to grow at 24% per year for the next two years and at 8% per year thereafter. If the required rate of return in the stock is 16% (APR), calculate the current value of the stock.
A. $1.11
B. $7.71
C. $8.82
D. None of the above
Answer
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Related questions
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Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate).
A. $5.00
B. $2.14
C. $0.86
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Q:
Suppose Ralph's stock price is currently $50. In the next six months it will either fall to $30 or rise to $80. What is the option delta of a call option with an exercise price of $50?
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A call option has an exercise price of $100. At the final exercise date, the stock price could be either $50 or $150. Which investment would combine to give the same payoff as the stock?
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B. Lend PV of $50 and sell two calls
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B. Fall exactly by the amount of the dividend
C. Fall by less than the amount of the dividend
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Q:
One key assumption of the Miller and Modigliani (MM) dividend irrelevance argument is that:
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B. There are no capital gains taxes
C. All investments are risk-free
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Generally, investors view the announcement of open-market repurchase of stocks as:
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B. good news and the stock price increases
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Generally, investors interpret the announcement of a decrease in dividends as:
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Generally, investors interpret the announcement of an increase in dividends as:
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D. very bad news and the stock price plunges