Questions from Corporate Finance

Q: An investor purchased 600 shares of stock A at $23 per

An investor purchased 600 shares of stock A at $23 per share and 1,000 shares of stock B at $34 per share one year ago. Stock A and stock B paid quarterly dividends of $1 per share and $1.50 per share...

Q: Apex Financial Ltd. is concerned about the impact of errors in

Apex Financial Ltd. is concerned about the impact of errors in its estimates of the future dividend payout ratio for Barnett Steel Corporation. Assume that the current dividend is $1, ROE is fixed at...

Q: What is the “bigger fool theorem” of valuation?

What is the “bigger fool theorem” of valuation?

Q: How can we estimate future growth rates?

How can we estimate future growth rates?

Q: Why is share value based on the present value of expected future

Why is share value based on the present value of expected future dividends?

Q: Why does an increase in the expected dividend growth rate increase share

Why does an increase in the expected dividend growth rate increase share prices?

Q: Why can’t the expected growth rate exceed the investor’s required return in

Why can’t the expected growth rate exceed the investor’s required return in the constant growth model?

Q: Dillon Mechanical Inc. ’ s first dividend of $2 per

Dillon Mechanical Inc. ’ s first dividend of $2 per share is expected to be paid six years from today. From then on, dividends will grow by 10 percent per year for five years. After five years, the gr...

Q: TelTec Inc. stock is expected to sell for $10 per

TelTec Inc. stock is expected to sell for $10 per share four years from now. TelTec has just paid a dividend of 50 cents per share. Dividends are expected to grow at a rate of 5 percent per year for t...

Q: JINX Ltd. had earnings per share of $5 as of

JINX Ltd. had earnings per share of $5 as of December 31, 2015, but paid no dividends. Earnings were expected to grow at 15 percent per year for the following five years. JINX Ltd. will start paying d...