Growth and dividend stocks
[DOC File]Value & Growth Stock
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The returns of both value and growth stocks in the large capitalization category were approximately normally distributed, over the past 20+ years. While the growth stocks had better performance, they also had a larger standard deviation, or volatility, which makes them more risky. Both indexes displayed negative skewness.
[DOC File]Stocks
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Stocks may have periods of supernormal growth, where gs > rs; however, this growth rate cannot be sustained indefinitely. In the long-run, g < rs. c. Assume that temp force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7 percent, and that the market risk premium is 5 percent.
[DOC File]Quiz 1: Fin 819-02
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C) Dividend yield / expected rate of growth in dividends . D) (Dividend yield) * (expected rate of growth in dividends) E) None of the above. Answer: A. 7. Mcom Co. is expected to pay a dividend of $4 per share at the end of year one and the dividends are expected to grow at a constant rate of 4% forever.
Chapter 9
7. The constant growth dividend model uses the: historical growth rate in dividends. historical growth rate in earnings. estimated growth rate in dividends. estimated growth rate in earnings. (c, moderate) 8. The zero-growth dividend model: gives the highest value for a common stock. is the most accurate model to use.
[DOC File]Expected Dividend Growth and Valuation Ratios
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This model says that the current price of a stock, , depends on three factors: 1) the dividend the stock paid in the previous period, , the current period expectation of the future growth rate in dividends, , and the current period discount rate relevant for stocks in the firm’s risk category, , as related in equation (1).
[DOC File]CHAPTER 8
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The two stocks have the same dividend growth rate. d. The stock with the higher dividend yield will have a lower dividend growth rate. e. The stock with the higher dividend yield will have a higher dividend growth rate. Dividend yield and g Answer: c Diff: E. Stocks A and B have the same price, but Stock A has a higher required rate of return ...
[DOC File]THEORY - CPA Diary
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By using the dividend growth model, which of the following corporations has the lowest cost of equity capital? Stock Price Dividend Growth Rate C.S. Inc. $25 $5 8% Lewis Corp. 30 3 10% Screwtape Inc. 20 4 6% Wormwood Corp. 28 7 7% A. C.S. Inc. C. Screwtape Inc. B. Lewis Corp. D. Wormwood Corp. 16.
[DOCX File]Valuation: Dividends, Book Values, and Earnings
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To capture this idea, the dividend growth model shows that equity value (P 0) equals capitalized forthcoming dividends (d 1 /r e) plus the present value of subsequent capitalized dividend increments [(d 2 – d 1)/r e]. (Note: this transformation differs from the so-called Gordon and Williams model, which assumes a constant growth in dividends.)
[DOC File]Chapter 7
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In the second stage, we can use the Gordon growth model (constant growth model to find P7, which represents the cash flows in this stage. The first dividend in the second stage is D8 ($2). The price today for this stock with a required rate of return of 15% is calculated in the following way:
[DOC File]Dividend Yield
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Stocks with high dividend yields tend to belong to mature companies with few growth opportunities. Because the companies can't make much by investing profits in growth, they pay those profits back to their shareholders in the form of dividends. Utilities, with an average yield of 4.3% at the start of 2000, are classic dividend-paying stocks; as ...
[DOC File]CHAPTER 5- VALUING STOCKS
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4. If next year’s dividend is forecast to be $5.00, the constant growth rate is 4%, and the discount rate is 16%, then the current stock price should be: A) $31.25 B) $40.00 C) $41.67 D) $43.33 Answer: D Difficulty: Medium Page: 145, 1st paragraph. Po = $41.67 = 5.
[DOC File]STOCKS - uCoz
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Stocks that fit a strategy of value investing frequently belong to companies that operate in relatively mature industries and possess attractive assets such as major brand-name products, real estate, and a strong balance sheet. Investors should generally have a mix of growth and value stocks.
Chapter 13
7. Explain how dividend yield on the S&P 500 Index can be used to make market forecasts. (moderate) Answer: When dividend yield drops below three percent, the market is expected to fall in the near future. Investors will sell stocks and seek higher yielding bonds, causing prices to adjust. Critical Thinking/Essay Questions. 1.
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