Financial Management - Study Mode
[#281] An expected dividend yield is subtracted from an expected rate of return which is used to calculate
Correct Answer
(B) capital gains yield
Explanation
Solution: An expected dividend yield is subtracted from an expected rate of return which is used to calculate capital gains yield. Capital gains yield is the percentage price appreciation on an investment.
[#282] First step in calculating value of stock with non-constant growth rate is to
Correct Answer
(A) estimate expected dividend
Explanation
Solution: First step in calculating value of stock with non-constant growth rate is to estimate expected dividend. Dividend yield refers to a stock's annual dividend payments to shareholders, expressed as a percentage of the stock's current price.
[#283] An expected dividend yield is 7.5% and an expected rate of return is 15.5% then constant growth rate will be
Correct Answer
(B) 8.00%
Explanation
Solution: Constant growth rate = Expected rate of return - Expected dividend yield = 15.5% - 7.5% = 8.00%
[#284] Average rate of return which is required by all investors of company is classified as
Correct Answer
(B) weighted average cost of capital
Explanation
Solution: Average rate of return which is required by all investors of company is classified as weighted average cost of capital. The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.
[#285] An actual rate of return is subtracted from expected growth rate then it is divided from dividend stockholders expects use for calculating
Correct Answer
(C) constant growth model
Explanation
Solution: An actual rate of return is subtracted from expected growth rate then it is divided from dividend stockholders expects use for calculating constant growth model. The Gordon Growth Model is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. It is a popular and straightforward variant of a dividend discount model (DDM).