For a price of $102, Andrea will sell you a share which just paid a dividend of $10 yesterday, and is expected to pay dividends every year forever, growing at a rate of 5% pa.
So the next dividend will be ##10(1+0.05)^1=$10.50## in one year from now, and the year after it will be ##10(1+0.05)^2=11.025## and so on.
The required return of the stock is 15% pa.
For a price of $95, Sherylanne will sell you a share which is expected to pay its first dividend of $10 in 7 years (t=7), and will continue to pay the same $10 dividend every year after that forever.
The required return of the stock is 10% pa.
Which one of the following bonds is trading at a discount?
Which of the following investable assets are NOT suitable for valuation using PE multiples techniques?
Discounted cash flow (DCF) valuation prices assets by finding the present value of the asset's future cash flows. The single cash flow, annuity, and perpetuity equations are very useful for this.
Which of the following equations is the 'perpetuity with growth' equation?
Which of the following quantities from the Black-Scholes-Merton option pricing formula gives the Delta of a European call option?
Which of the following is NOT the Australian central bank’s responsibility?
The below diagram shows a firm’s cash cycle.
Which of the following statements about companies’ cash cycle is NOT correct?
Arthur and Bindi are the only people on a remote island. Their production possibility curves are shown in the graph.
Which of the following statements is NOT correct?