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A stock is expected to pay the following dividends:

 Cash Flows of a Stock Time (yrs) 0 1 2 3 4 ... Dividend ($) 0.00 1.00 1.05 1.10 1.15 ... After year 4, the annual dividend will grow in perpetuity at 5% pa, so; • the dividend at t=5 will be$1.15(1+0.05),
• the dividend at t=6 will be $1.15(1+0.05)^2, and so on. The required return on the stock is 10% pa. Both the growth rate and required return are given as effective annual rates. What will be the price of the stock in three and a half years (t = 3.5)? A stock is expected to pay the following dividends:  Cash Flows of a Stock Time (yrs) 0 1 2 3 4 ... Dividend ($) 0.00 1.15 1.10 1.05 1.00 ...

After year 4, the annual dividend will grow in perpetuity at -5% pa. Note that this is a negative growth rate, so the dividend will actually shrink. So,

• the dividend at t=5 will be $1(1-0.05) = 0.95$,
• the dividend at t=6 will be $1(1-0.05)^2 = 0.9025$, and so on.

The required return on the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.

What will be the price of the stock in four and a half years (t = 4.5)?

Acquirer firm plans to launch a takeover of Target firm. The firms operate in different industries and the CEO's rationale for the merger is to increase diversification and thereby decrease risk. The deal is not expected to create any synergies. An 80% scrip and 20% cash offer will be made that pays the fair price for the target's shares. The cash will be paid out of the firms' cash holdings, no new debt or equity will be raised.

 Firms Involved in the Takeover Acquirer Target Assets ($m) 6,000 700 Debt ($m) 4,800 400 Share price ($) 40 20 Number of shares (m) 30 15 Ignore transaction costs and fees. Assume that the firms' debt and equity are fairly priced, and that each firms' debts' risk, yield and values remain constant. The acquisition is planned to occur immediately, so ignore the time value of money. Calculate the merged firm's share price and total number of shares after the takeover has been completed. In a takeover deal where the offer is 100% cash, the merged firm's number of shares will be equal to the acquirer firm's original number of shares. or ? Which of the following statements about inflation is NOT correct? A$100 stock has a continuously compounded expected total return of 10% pa. Its dividend yield is 2% pa with continuous compounding. What do you expect its price to be in one year?

Which of the following statements about returns is NOT correct? A stock's:

The following steps set out the process of ‘negative gearing’ an investment property in Australia. Which of these steps or statements is NOT correct? To successfully achieve negative gearing on an investment property:

If future expected cash flows rise, and future required returns remain the same, then prices will , or remain the ?

Over-priced assets should NOT: