6. This morning, you bought 774 shares of ABC Inc. for $44.36 each. Right after
ID: 2775707 • Letter: 6
Question
6. This morning, you bought 774 shares of ABC Inc. for $44.36 each. Right after you bought these shares, ABC Inc.'s earnings report came out. You now think they will grow at 0% and require a return of 16%. Their most recent dividend was $7.47. What is your total profit(loss)?
7. Compute the current market value of a bond with a $784 face value, maturing in 9 years, an interest rate of 10%, and annual payments of $64
8. Compute the present value of an ordinary annuity receiving 7 annual payments of $29 at an interest rate of: 21% (round to 2 decimal places)
9. Compute the Present Value of a payment of $181 received in 2 years at a discount rate of 5%.
10. The last dividend for ABC Manufacturing was $3.50, and the expected growth rate is 6 percent.If you require a return of 12 percent, what is the most that you would pay for this stock?
Explanation / Answer
6)
Dividend per share Do = 7.47
Required return r= 16%
Price of the share after earnings report = Do/ r
= 7.47/0.16
=46.69
Purchase price =44.36
Total profit = (Latest price – purchase price) x no. of shares
= (46.69 -44.36) x774
=1,803.42
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