Question

# 1. XYZ Inc. has paid annual dividends of \$.48, \$0.60, and \$0.62 a share over the...

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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