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Johnny purchased $5,000 of Zenith Manufacturing common stock when it was selling for $125 per...

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Accounting

  1. Johnny purchased $5,000 of Zenith Manufacturing common stock when it was selling for $125 per share. Today, which is one year after he purchased Zenith, Johnny sold the stock for $135. During the past year, Zenith paid a quarterly dividend equal to $1.50 per share. (a) What rate of return did Johnny earn on his investment in Zenith? (b) What were the (1) dividend yield and (2) the capital gains yield associated with holding the stock?

  2. Everything else equal, how would each of the following factors affect the market value of a stock? Indicate by a plus (+), minus (), or zero (0) if the factor would increase, decrease, or have an indeterminate effect. Be prepared to justify your answer.

    a.Investors require a higher rate of return to buy the stock. b.The company increases dividends. c.The companys growth rate increases. d.Investors become more risk averse.

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