Need help with this problem set finance excersises please it's due 2 p.m.

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SUMMARY

This discussion focuses on solving finance exercises from Economics 173B, specifically Problem Set #2. Key calculations involve determining return on equity, share price, and dividend yield based on given parameters such as expected dividends, capital gains, and market capitalization rates. The exercises require a structured approach, including setting up the problem, formulating equations, and providing clear solutions. Participants are reminded to show their work to facilitate better assistance.

PREREQUISITES
  • Understanding of financial concepts such as return on equity and dividend yield.
  • Familiarity with the Dividend Discount Model (DDM) for stock valuation.
  • Basic knowledge of capital gains and market capitalization rates.
  • Ability to perform financial calculations and interpret results.
NEXT STEPS
  • Research the Dividend Discount Model (DDM) and its applications in stock valuation.
  • Learn how to calculate return on equity using financial statements.
  • Explore the impact of changing growth rates on stock valuations.
  • Study the relationship between dividend yield and share price in equity markets.
USEFUL FOR

Finance students, investment analysts, and anyone involved in stock valuation and financial analysis will benefit from this discussion.

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Economics 173B Summer 2009
Problem Set #2
Write your solutions clearly and show at least three steps of work: (1) set-up (2) equation
(3) solution. Circle your solution.
1.
a. Share price is $100.00, expected dividend is $ 4.00 one year from now. expected
capital gain is 9%, What is the return on equity?
b. Expected dividend is $7.50 one year from now on EPS of $15. If the current
dividend yield is 8% and return on equity is 14%, What is the share price today?
2. True Blue Hardware Co. will pay a dividend of $2.00 per share this year and dividends
per share are expected to grow at a rate of 5% per year in perpetuity. The market capitalization
rate is 9.8% for stocks with similar risk.
a. Compute the current price and dividend yield for the Company’s shares.
b. Estimate the share price, dividend yield and capital gain on the Company’s shares
three years from now.
c. Based on new information, the growth rate on the Company’s dividends is
lowered to 2% per year in perpetuity. How does this change your answer for part
a?
 
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The rules of this forum say that you need to show what you have tried to do. All I see from you is the problem description, but no work on your part.
 

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