1. Current Price P0 =50, Dividend = 2, Equity Cost of capital = 15% P1 = P0* (1+15%) – Div1 = 50%... more 1. Current Price P0 =50, Dividend = 2, Equity Cost of capital = 15% P1 = P0* (1+15%) – Div1 = 50%1.15-2 = 55.5 4. P0 = 22, Div1 = 0.88 this year, P1 = 23.54 Dividend yield = div1/ P0 = 0.88/22 = 4% Capital gain rate = (PI-P0)/P0= (23.54-22)/22 = 7% Equity cost of capital = 4% + 7% =11% 7. cost of capital r = 8%, g = 1.5%, P = DIV/(r-g), then r= DIV/P + g a. growth rate of dividend = DIV/P = r – g = 8%-1.5% = 6.5% b. growth rate of share price = 6.5%, because P = D/(r-g), growth of stock price = growth rate of the Dividend. 9. 2006 and 2007, annual dividends = 0.72; 2008, dividend = 0.36; 2009-2012, dividend = 0 P12= 15.25, r =5% a. P06 = 0.72/(1+5%) + 0.72/(1+5%) 2 +0.36/(1+5%) 3 +15.25/(1+5%) 7 =10.838+0.311+0.653+0.686=12.488 b. Yes, it was inefficient in 2006 because P06 < P12 10. dividend payout rate = 3/5 =60%, expected return on new invest = 15% a. growth rate of earnings = (1-60%) *15% = 6% b. cost of capital r = 12%, in constant rate g= 6%, so P0= Div1/(r-g) = 3/(12%-6%) = 50 c. Dividend = 4 per share, retained 1 per share in earnings, g = 1/5 * 15% = 3%, P0 = 4/(12%-3%) = 44.44. Should DFB raise its dividend? No, the projects are positive NPV, so don't raise dividend. 11. cut dividend from 4 to 2.5
1. Current Price P0 =50, Dividend = 2, Equity Cost of capital = 15% P1 = P0* (1+15%) – Div1 = 50%... more 1. Current Price P0 =50, Dividend = 2, Equity Cost of capital = 15% P1 = P0* (1+15%) – Div1 = 50%1.15-2 = 55.5 4. P0 = 22, Div1 = 0.88 this year, P1 = 23.54 Dividend yield = div1/ P0 = 0.88/22 = 4% Capital gain rate = (PI-P0)/P0= (23.54-22)/22 = 7% Equity cost of capital = 4% + 7% =11% 7. cost of capital r = 8%, g = 1.5%, P = DIV/(r-g), then r= DIV/P + g a. growth rate of dividend = DIV/P = r – g = 8%-1.5% = 6.5% b. growth rate of share price = 6.5%, because P = D/(r-g), growth of stock price = growth rate of the Dividend. 9. 2006 and 2007, annual dividends = 0.72; 2008, dividend = 0.36; 2009-2012, dividend = 0 P12= 15.25, r =5% a. P06 = 0.72/(1+5%) + 0.72/(1+5%) 2 +0.36/(1+5%) 3 +15.25/(1+5%) 7 =10.838+0.311+0.653+0.686=12.488 b. Yes, it was inefficient in 2006 because P06 < P12 10. dividend payout rate = 3/5 =60%, expected return on new invest = 15% a. growth rate of earnings = (1-60%) *15% = 6% b. cost of capital r = 12%, in constant rate g= 6%, so P0= Div1/(r-g) = 3/(12%-6%) = 50 c. Dividend = 4 per share, retained 1 per share in earnings, g = 1/5 * 15% = 3%, P0 = 4/(12%-3%) = 44.44. Should DFB raise its dividend? No, the projects are positive NPV, so don't raise dividend. 11. cut dividend from 4 to 2.5
Uploads
Papers by Tianxiang Lan