Kinston Nielson Motors has a share price of $25 today. If Nielson Motors is expected to...

Kinston Nielson Motors has a share price of $25 today. If Nielson Motors is expected to pay a dividend of $0.75 this year, and its stock price is expected to grow to $26.75 at the end of the year, then Nielson's dividend yield and equity cost of capital are:

	a.	3.0% and 7.0% respectively.
	b.	4.0% and 6.0% respectively.
	c.	3.0% and 10.0% respectively.
	d.	None of the answers are correct.
	e.	4.0% and 10.0% respectively.

Expert Solution

Dividend Yield = Current Year Dividend/Current Market Price = 0.75/25 = 3%

Growth rate = (26.75 - 25)/25 = 7%

Current Market Price by end of year = Future Dividend / ( equity cost of capital - growth)

=> 26.75 = 0.75*1.07/(cost of capital - 0.07)

=> Cost of capital = 10%

So the answer is option c

jeff jeffy answered 3 years ago

Jetson Industries has a share price of $ 21.57 today. If Jetson is expected to pay...

Jetson Industries has a share price of $ 21.57 today. If Jetson is expected to pay a dividend of $ 0.86 this year and its share price is expected to grow to $ 24.83 at the end of the year, what is Jetson's dividend yield and equity cost of capital?

Krell Industries has a share price of $21.25 today. If Krell is expected to pay a dividend of $1.06

Krell Industries has a share price of $21.25 today. If Krell is expected to pay a dividend of $1.06 this year, and its stock price is expected to grow to $24.73 at the end of the year, what isKrell's dividend yield and equity cost of capital?A) Krell's dividend yield is?B) Krell's capital gain rate is?C) Krell's equity cost of capital, or expected total return is?

the spot price of stock is $25. the dividends of $0.5 per share are expected after...

the spot price of stock is $25. the dividends of $0.5 per share are expected after 3 months, 6 months, and 9 months. assuming that interest rates are 8% per annum for all maturities, calculate the forward price of stock for delivery in 11 months.

Rumolt Motors has 35 million shares outstanding with a price of $14 per share.

Rumolt Motors has 35 million shares outstanding with a price of $14 per share. In addition, Rumolt has issued bonds with a total current market value of $521 million. Suppose Rumolt's equity cost of capital is 10%, and its debt cost of capital is 5%.a. What is Rumolt's pretax weighted average cost of capital?b. If Rumolt's corporate tax rate is 21%,what is its after-tax weighted average cost of capital?a. What is Rumolt's pretax weighted average cost of capital?Rumolt's pretax weighted...

Rumolt Motors has 41 million shares outstanding with a price of $39 per share. In addition,...

Rumolt Motors has 41 million shares outstanding with a price of $39 per share. In addition, Rumolt has issued bonds with a total current market value of $1,071 million. Suppose Rumolt's equity cost of capital is 11%, and its debt cost of capital is 6%. a. What is Rumolt's pretax weighted average cost of capital? b. If Rumolt's corporate tax rate is 38%, what is its after-tax weighted average cost of capital?

Future Motors is expected to pay an annual dividend next year of $3.10 a share.

Future Motors is expected to pay an annual dividend next year of $3.10 a share. Dividends are expected to increase by 1.85 percent annually. What is one share of this stock worth at a required rate of return of 15 percent? A) $24.01 B) $26.30 C)$24.56 ) $23.57 ) $24.59

Value and Returns A stock has an expected dividend yield of 3.8% a price today of...

Value and Returns A stock has an expected dividend yield of 3.8% a price today of $30 and an expected sale price in one year of $33. The stock has a beta of 1.2 and the expected return on the market is 10% while the risk free rate is 5%. This stock is _____________ by ________ basis points. overvalued; 143 undervalued; 280 undervalued; 143 overvalued; 280

Kai Zen Motors currently pays a dividend of $2 per share, and this dividend is expected...

Kai Zen Motors currently pays a dividend of $2 per share, and this dividend is expected to grow at a 20 percent annual rate for three years, and then at a 11 percent rate for the next two years, after which it is expected to grow at a 6 percent rate forever. What value would you place on the stock if a 16 percent rate of return were required? [5

The J. Miles Corp. has 25 million shares outstanding with a share price of $ 20...

The J. Miles Corp. has 25 million shares outstanding with a share price of $ 20 per share. Miles also has outstanding zero-coupon debt with a 5-year maturity, a face value of $ 900 million, and a yield to maturity of 9 %. The risk-free interest rate is 5 %. a. What is the implied volatility of Miles' assets? b. What is the minimum profitability index required for equity holders to gain by funding a new investment that does not...

If Fledgling Electronics is selling for $100 per share today and is expected to sell for...

If Fledgling Electronics is selling for $100 per share today and is expected to sell for $110 one year from now, what is the expected return if the dividend one year from now is forecasted to be $5.00?

Question