The Record, Inc. is a firm that archives computer records of
numerous business firms to save them computer space and yet allow
them easy retrieval. The firm has one million common shares
outstanding. The growth rate for Records, Inc. is five percent, and
analysts expect it to remain constant for the foreseeable future.
The last dividend paid (D0) was $0.95. Investors' required rate of
return is 15 percent.
a. What is the current value or price of the Record's stock?
b. What is the expected dividend yield?
c. What is the expected capital gain yield?
d. What is the expected total rate of return?
e. Why refer to each of the components as expected
values
f. What is the stock price one year from now?
g. What is the expected dividend yield one year from
now?
h. What is the expected capital gain yield one year from
now?
i. What is the expected total rate of return one year from
now?
j. If the growth rate were 8 percent instead of 5 percent,
what would be the value of Record's stock today?
k. If the growth rate were as stated initially (5 percent),
but the required rate of return increased from 15 percent to 17
percent, what would be the value of Record's stock?
l. Assume the required rate of return is back to its original
value of 15 percent, and the growth rate is still constant at 5
percent. If the last dividend paid (Dividendyear0) had been $1.00
instead of $0.95, what would be the value of Record's stock?
m. What are the two necessary conditions for the Constant
Growth Model to work?
I
just need solutions for wuestion e and m. Thanks.