Credenza Industries is expected to pay a dividend of $ 1.55 at the end of the coming year. It is expected to sell for $ 64 at the end of the year. If its equity cost of capital is 9%, what is the expected capital gain from the sale of this stock at the end of the coming year?

$3.87

Explanation:

Given the information:

the expected capital gain from the sale of this stock at the end of the coming year can be calculated :

= Expected selling price after a year -the stock current value

We need to find the stock current value  

The current stock value is given by:

The Cost of equity = the change in market price + dividend

<=>

<=> 1.09x = $65.55

<=> x = $60.13

=> the expected capital gain  = $64 - $60.13 = $3.87

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

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the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20