INR Ltd’s earnings per share next year is expected to be $2.10 and this is expected to grow at 5% p.a. for the foreseeable future. Its required rate of return on equity has been estimated at 9% p.a. INR Ltd has a policy of reinvesting 40% of its earnings. The present value of INR Ltd’s growth opportunities is closest to: A. $7.78. B. $8.17. C. $11.11. D. $12.11
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5% p.a. for the foreseeable future. Its required
p.a. INR Ltd has a policy of reinvesting 40% of its earnings. The present value of INR Ltd’s
growth opportunities is closest to:
B. $8.17.
C. $11.11.
D. $12.11
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- The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay $0.75 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock? A. 8.26% B.11.34% C.10.12% D.14.97% E. 15%The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay $0.75 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 49% annually and expects to continue doing so. What is the market rate of return on this stock? A. 8.26% B.11.34% C. 10.12% D.14.97% E. 15%Matollows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? 4. Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings and expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects could be considered. (b)Using the NPV technique, is the project worth taking? What have you learned from your analysis as far as treating inflation in investment analysis is concerned? 30/2021 4:39:41 PM Page 1 of 2
- The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay S0.75 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock? A. 8.26% B.11.34% С. 10.1296 D.14.97% Е. 15%Consider company ABC. Today it is 1st of January 2023 and ABC has just paid a dividend of £3 million. The expected earnings of ABC for the next 30 years are forecast to grow at a rate of 15% per annum. From 1st of January 2053 and onwards the earnings of ABC are expected to grow at a rate of 5%. The required rate of return of ABC is 12% per annum. The current dividend policy of ABC is such that they pay out 50% of its earnings as dividends (assume that they pay their dividends on 1st of January every year). a) Suppose that the dividend payout ratio is expected to stay constant in the future. What is the value of ABC stock? Show and explain your calculations and any assumptions you make. b) Just after the dividend payment on 1st of January 2043, ABC is planning to reduce their dividends and only pay out 40% of its earnings. What is the value of ABC under the new dividend policy? c) Provide a recommendation to the management of ABC as to whether they should increase/cut back on…You may purchase 100 shares of Mun Tee ltd on a 55 percent margin when the shares are selling at K20 each. The Lusaka stock exchange broke charges you 10 percent annual interest,and commission are 3 percent of total stock value on both the purchase and the sale. If a year later you receive a K0.50 per share dividend and sell the stock for K27. What's your rate of return on investment?
- 13. An industrial engineer invests $100,000.00 now, and in three years he adds $3,000.00 to the investment. He is able to withdraw $5,000.00 the first year increasing by $1,000.00 each year for 10 years. He also will be withdrawing $50,000.00 in five years and $20,000.00 in 10 years. Using net present worth analysis, determine the rate of return on the investment. Using equivalent uniform annual worth analysis, determine the rate of return.The following cash flows result from a potential construction contract for Erstwhile Engineering. 1. Receipts of $600,000 at the start of the contract and $1,200,000 at the end of the fourth year. 2. Expenditures at the end of the first year of $500,000 and at the end of the second year of $1,100,000. 3. A net cash flow of zero at the end of the third year. Using an appropriate rate of return method, for a MARR of 25 percent, should Erstwhile Engineering accept this project? Erstwhile Engineering of return is percent, which is (Round to two decimal places as needed.) accept the project because the rate the MARR.The following cash flows result from a potential construction contract for Erstwhile Engineering. 1. Receipts of $600,000 at the start of the contract and $1,500,000 at the end of the fourth year. 2. Expenditures at the end of the first year of $500,000 and at the end of the second year of $1,100,000. 3. A net cash flow of zero at the end of the third year. Using an appropriate rate of return method, for a MARR of 25 percent, should Erstwhile Engineering accept this project? Erstwhile Engineering should not accept the project because the rate of return is 17.83 percent, which is less than the MARR. (Round to two decimal places as needed.)
- What is the value of the common stock of ABD Company if the dividend paid last year was $3.50, at a constant growth of 5 percent and investors require a 20% rate of return?Wu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5,000 or any dividend income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends. What classification of common stock would you recommend to Ji? Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number c3.Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay $075 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 49% annually and expects to continue doing so. What is the market rate of return on this stock?
