Question

Due to the advent and proliferation of life extension technology, the funeral services industry has been seeing a steady year-to-year decline. Press F is a publicly-listed, low-cost chain of funeral homes that specialises in helping bereaved families pay respects. The firm has just paid its annual dividend of $7.75 per share. Shares of Press F currently trade on the market for a price of $39.76 each, with investors requiring a return of 15.5% per annum. Based on the above information, which of the following is closest to the constant annual rate of decline that investors anticipate in the dividends of Press F?

a. 4.96% b. 3.34% c. 3.47% d. 3.99% e. 3.04%

Answer 1

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- 2x BEHAR DE IK 5 90 91 PO= 93 ke - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Fill 2 m Paste BIU - D A SF Merge Merge & Center - Center $ % % , 4:0 .00 :.: Conditional Format Cell Insert Delete Format Format Painter Sort & Find & Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing 1B106 fix HY HZ IA IB IC ID IE IF IGIH L D 88 89 PRESS F. FINDING GROWTH RATE DO = 7.75 92 39.76 ke= 15.50% 94 95 D1 = DO*(1+g) = 7.75*(1+g) 96 ker D1/PO+g 98 15.50% = 7.75*(1+g)/39.76+g 99 0.155 = 0.19491952*(1+g) +g 100 0.155 = 1.19491952(g) +0.19491952 1.19491952(g) = 0.03991952 102 0.03340771 103 ANSWER g = 3.34% 104 105 106 M KE CAPM UTILITY, SHARPE, beta convexity DGM beta port future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY_DIR right clean YIELD bond portfolio cap stru WACC Red ferences: 218 |BOJ 130% 97 101 K RESI el "A-: - 08-11-2019