Question

In: Finance

calculate #3 return on investment

ART I: STOCK VALUATION

                
 

Dividend from Financial Statements:

              

Read the Explanations to the right of the calculation cells for specific information on the data.

                
  Year Cash Div/share ($) Dividend Yield Stockholder's Equity (in millions) Stock Price      
  2015 2.92 3.00% 2,491 97.33333333      
  2016 3.12 2.70% 429 115.5555556      
  2017 3.32 2.60% 1,030 127.6923077      
                 

1. Stock Valuation - The new dividend yield if the company increased its dividend per share by 1.75

                
                 
  Year Cash Div/Share ($) +1.75 Dividend Yield Stockholder's Equity (in millions) Stock Price      
  2015 4.67 4.80% 2,491 97.33333333      
  2016 4.87 4.21% 429 115.5555556      
  2017 5.07 3.97% 1,030 127.6923077      
                 

2. The dividend yield if the firm doubled it's outstanding shares

                
                 
  Year Cash Div/Share ($) Dividend Yield Stockholder's Equity (in millions) -doubled Stock Price      
  2015 1.46 1.50% 4,982 97.33333333      
  2016 1.56 1.35% 858 115.5555556      
  2017 1.66 1.30% 2,060 127.6923077      
                 
                 

3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated above

                
                 
  Year Cash Div/Share ($) +1.75 Stock Price Return on Investment        
  2015 4.67 97.33333333   CALCULATE ROI      
  2016 4.87 115.5555556  

(Dividends + Capital gain)/ Divided by the original Price

      
  2017 5.07 127.6923077   (D1 + (P1-P0)) / PO

Solutions

Expert Solution

Return on equity

2015 4.80% 4.67*100/97.33333333
2016 23.72% 4.87+(115.5555556-97.33333333)/97.33333333
2017 36.40% 5.07+(127.6923077-97.33333333)/97.33333333

 

The Return on equity for the three consecutive years is as 2015- 4.8% , 2016 -23.72% & 2017 -36.40%

 

ROE 0 Net Income / Shareholders equity

Prathyusha answered 1 year ago
Next > < Previous

Related Solutions

a) Calculate the dynamic payback period for the project A b) Calculate the return on investment...
a) Calculate the dynamic payback period for the project A b) Calculate the return on investment of the project A c) Determine the appropriate selling price which will ensure the NPV of project A and B are the same d) Determine if the NPV of the project A is more sensitive to interest rate than the selling price. Use appropriate diagrams and appropriate parameter Parameter Project A Project B Project lifetime years 20 20 Real interest rate 10% 10% Investment...
Calculate and report the economic justification measures, present worth, return on sales, return on investment, and...
Calculate and report the economic justification measures, present worth, return on sales, return on investment, and payback, shown in Chapter 9 example 9.4 for the investment cash flows shown below. The new method will cost $14,800 with no salvage planned. Use an interest rate of 10%. Note the payback measure asked in this question is calculated differently than the example 9.4 calculation. Year Sales Increase $ Production Cost $ 1 8,500 4,100 2 11,200 7,100 3 19,400 12,700 4 12,400...
Consider the following information and then calculate the required rate of return for the Scientific Investment...
Consider the following information and then calculate the required rate of return for the Scientific Investment Fund, which holds 4 stocks. The market's required rate of return is 16%, the risk-free rate is 4%, and the Fund's assets are as follows: Stock Investment Beta A $ 200,000 1.50 B 300,000 -0.50 C 500,000 1.25 D 1,000,000 1.3 Round it to two decimal places without the percent sign (%), e.g., 13.56. Assume that the risk-free rate is 4 percent, and that...
Calculate the Return on Investment for a company that has net income from a product of...
Calculate the Return on Investment for a company that has net income from a product of $55.000, net cash flows of $35,000 and the average invested assets on that product was $645,000. a 8.5% b 5.4% c 9.3% d 3.1% The future value of $1,000 invested in an investment yielding 8% in 12 years will be $2.518. True /False Jack wants to know how much he will need to invest today to have $50,000 in his account after 8 years....
The real rate of return on an investment is 3% and the inflation rate is 2.25%....
The real rate of return on an investment is 3% and the inflation rate is 2.25%. What is this investment's nominal rate of return
Calculate the rate of return for an investment with the following characteristics. Initial cost $20,000 Project...
Calculate the rate of return for an investment with the following characteristics. Initial cost $20,000 Project life 10 years Annual receipts $6000 Annual disbursements $3000
1. Calculate the average return over the last 3 years. 2. Calculate the standard deviation of...
1. Calculate the average return over the last 3 years. 2. Calculate the standard deviation of your company’s returns over the last 3 years. [I will make sure to give thumbs up to those who answer] 8/1/2016 100.975754 9/1/2016 108.172951 10/1/2016 108.6418 11/1/2016 105.752083 12/1/2016 111.392426 1/1/2017 116.711029 2/1/2017 131.753159 3/1/2017 138.767197 4/1/2017 138.757538 5/1/2017 147.557281 6/1/2017 139.689148 7/1/2017 144.257507 8/1/2017 159.068329 9/1/2017 150.072464 10/1/2017 164.600632 11/1/2017 167.336838 12/1/2017 165.378021 1/1/2018 163.618988 2/1/2018 174.065674 3/1/2018 164.629501 4/1/2018 162.15683 5/1/2018 183.361038...
You invested 10,000 in Netflix on July 27th and need to calculate your return on investment...
You invested 10,000 in Netflix on July 27th and need to calculate your return on investment on September 17th. The stock price on July 27th was 495.65 and the price on September 17th was 470.20. Calculate investment return both in dollars and percentage.
You have been asked to calculate the Return on Investment (ROI) for a project whose development...
You have been asked to calculate the Return on Investment (ROI) for a project whose development will be accomplished during a single calendar year with the go-live date of Jan 1st   The project, to develop a new Web-based ordering and fulfillment system, has already been conceptualized, and the team has provided estimates and a partial resource plan. Labor Operating expenses in years 2 through 5 are projected to be $57,000 annually. Miscellaneous expenses in years 2 through 5 are projected...
You have been asked to calculate the Return on Investment (ROI) for a project whose development...
You have been asked to calculate the Return on Investment (ROI) for a project whose development will be accomplished during a single calendar year with the go-live date of Jan 1st   The project, to develop a new Web-based ordering and fulfillment system, has already been conceptualized, and the team has provided estimates and a partial resource plan. Labor Operating expenses in years 2 through 5 are projected to be $57,000 annually. Miscellaneous expenses in years 2 through 5 are projected...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT