1. XYZ Inc. has paid annual dividends of $.48, $0.60, and $0.62 a share over the past three years, respectively. The company plans to maintain a constant dividend in the future. If the required rate of return is 14% for such stock with no growth potential, how much is the price per share you are willing to pay? Answer: _____ ( round to 2 decimal places)
2. ABC pays a constant dividend of $0.75 a share. The company announced today that they will continue to pay this for another 3 years after which time they will discontinue operations. What is one share of this stock worth today if the required rate of return is 18 percent? Your answer: $ _________(round to 2 decimal places)
3. XYZ just paid an annual dividend of $1.75. It plans to increase by 2 percent annually every year after. The required rate of return is 14.5%. How much will one share of stock be worth six years from now? $ ________ (round to nearest two decimal places)
4. ABC inc just paid $1.79 to its shareholders as the annual dividend. The future dividends will be increasing by 3.2 percent. If you require a 10.5 percent rate of return, then the stock price per share today is : $_______ (please round to 2 decimal places, enter numbers only )
5. ABC will be growing its dividend rapidly in the next three year at 25% a year. After that, it will maintain 6% annual growth rate. The most recently paid annual dividend is $0.80 per share. What is the current value of one share of this stock if the required rate of return is 17 percent? Answer $______ ( round to two decimal places).
Must show all process & all formula to receive fall credit.
1)
| Stock price (P0) | D1÷(r-g) | |
| Here, | ||
| Expected dividend (D1) | $ 0.70 | 0.62*(1+13.65%) |
| Required return ( r) | 14.00% | |
| Growth rate (g) | 13.65% | (0.62/0.48)^(1/2)-1 |
| Stock price (P0) | $ 202.20 | |
| 0.70/(14%-13.65%) |
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