Question

1. AVZ is a​ start-up company who is using all its cash to growth so it does not plan to pay dividends for the next 6 years. The company then plans to start paying annual cash dividends starting in year 7 of $5.00 for 10 years. ​ Thereafter, the company will assume a constant growth dividend policy and the estimated growth rate in dividends forever after that point is 2​%. The price of the stock is set to yield a return of 10​%. What is the price of this stock​ today?The price today is  

​$___   

​(Do not use​ $ sign. Use commas to separate thousands. In this​ answer, please use TWO decimals in your response and round to the nearest cents. For example if your answer is​ $1,110.283 then enter ​1,110.28​)

2. MMM Inc. has an annual cash dividend policy that raises the dividend each year by 14.00​%. Last​ year's dividend was ​$1.30 per share. Investors want a 16​% return on this stock. What is the price today of this stock if the company will be in business for five years and not have a liquidating dividend​ (there is no selling price​ - stock simply cease to exist with no value​ then)?

The price of this stock today is$___

​(Do not use​ $ sign. Use commas to separate thousands. Use two decimals. Round to the nearest​ cent.)

3. G-2 Inc. expects the following dividend pattern over the next seven​ years:

Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
​$1.20	​$1.25	​$1.30	​$1.35	​$1.40	​$1.46	​$1.52

The company will then have a constant dividend of

​$1.58 forever. What is the price of this stock today​ (year 0) if an investor wants to earn 16​% rate of​ return?

The stock price is $___

​(Round to two decimal​ places.)

Answer 1

1)

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