Question

1. Stock Values

Courageous, Inc. just paid a dividend of $1.80per share on its
stock. The dividends are expected to grow at a constant rate of 3
percent per year, indefinitely. If investors require a 12 percent
return on Courageous stock, what is the current price? What will
the price be in 3 years? In 15 years?

PART A:

Current Price: $____________.

PART B:

Price in Three Years: $____________.

PART C:

Price in Fifteen Years: $____________.

#4 Stock Values

The next dividend payment by ASAP, Inc., will be $2.00 per share.
The dividends are anticipated to maintain a 4 percent
growth rate, forever. If ASAP stock currently sells for $14.75 per
share, what is the required return?

Required Return: ____________%

For the company in the previous problem, what is the dividend
yield? What is the expected capital gains yield?

PART A:

Dividend yield: ____________%

PART B:

Capital Gains Yield: ____________%

#7 Stock Values

Calphony Corporation will pay a $4.00 per share dividend next year.
The company pledges to increase its dividend by 5.00 percent per
year, indefinitely. If you require a 12 percent return on your
investment, how much will you pay for the company's stock
today?

Current stock price: $ ____________.

#8 Stock Valuation

Suppose you know that a company s stock currently sells for $60 per
share and the required return on the stock is 17 percent. You also
know that the total return on the stock is evenly divided between
capital gains yield and dividend yield. If it is the company s
policy to always maintain a constant growth rate in dividends, what
is the current dividend per share?

DPS: $ ____________.

#9

Stock Valuation

Cornwing Corporation pays a constant $4.00 dividend on its stock.
The company will maintain this dividend for the next 12 years and
will then cease paying dividends forever. If the required return on
this stock is 15 percent, what is the current share price?

Current stock price: $ ____________.

#10 Valuing Preferred Stock

Bullish, Inc. has an issue of preferred stock outstanding that pays
an $8.00dividend every year, in perpetuity. If this issue currently
sells for $98 per share, what is the required return?

Required Return: ____________%

#11 Growth Rates

Megavoltage Co. is expected to maintain a constant 5 percent growth
rate in its dividends, indefinitely. If the company has a dividend
yield of 6.5 percent, what is the required return on the power
company's stock?

Required Return: ____________%

#12

Stock Valuation

Magellen Corporation stock currently sells for $56 per share. The
market requires an 12 percent return on the firm s stock. If the
company maintains a constant 4 percent growth rate in dividends,
what was the most recent dividend per share paid on the
stock?

DPS: $ ____________.

#13

Stock Quotes You have found the following stock quote for ORF Enterprises, Inc., in the financial pages of today s newspaper. What was the closing price for this stock that appeared in yesterday s paper? If the company currently has 1 million shares of stock outstanding, what was net income for the most recent four quarters?

YTD% r |
52 wk Hi |
52 wk Lo |
Stock |
Sym |
Div |
Yld % |
PE |
Vol 100s |
Last |
Net Chg |

103.45 |
55.3 |
12.68 |
ORF |
ORF |
.75 |
2.5 |
45 |
31346 |
???? |
5.20 |

PART A:

Closing price in yesterday s paper: $____________.

PART B:

Net Income for most recent four quarters: $____________.

Answer #1

**1]**

Stock price = current dividend * (1 + growth rate) / (required return - growth rate)

PART A:

Current Price = $1.80 * (1 + 3%) / (12% - 3%)

Current Price = $20.60

PART B:

Dividend in 3 years = current dividend * (1 + growth rate)3

Dividend in 3 years = $1.80 * (1 + 3%)3

Price in Three Years = $1.80 * (1 + 3%)3 * (1 + 3%) / (12% - 3%)

Price in Three Years = $22.51

PART C:

Dividend in 15 years = current dividend * (1 + growth rate)15

Dividend in 15 years = $1.80 * (1 + 3%)15

Price in Fifteen Years = $1.80 * (1 + 3%)15 * (1 + 3%) / (12% - 3%)

Price in Fifteen Years = $32.09

1. A stock just paid a dividend of $4.73 and is expected to
maintain a constant dividend growth rate of 4.6 percent
indefinitely. If the current stock price is $84, what is the
required return on the stock?
2. Gnomes R Us just paid a dividend of $1.95 per share. The
company has a dividend payout ratio of 55 percent. If the PE ratio
is 17.4 times, what is the stock price?

1) The Jackson-Timberlake Wardrobe Co. just paid a dividend of
$1.48 per share on its stock. The dividends are expected to grow at
a constant rate of 7 percent per year indefinitely.
Required: (a) If investors require a 13 percent return on The
Jackson-Timberlake Wardrobe Co. stock, what is the current price?
(b) What will the price be in 8 years?
2) Antiques R Us is a mature manufacturing firm. The company
just paid a $5 dividend, but management expects...

Sea Side, Inc., just paid a dividend of $2.32 per share on its
stock. The growth rate in dividends is expected to be a constant
5.9 percent per year indefinitely. Investors require a return of 22
percent on the stock for the first three years, then a return of 17
percent for the next three years, and then a return of 15 percent
thereafter. What is the current share price? (Do not round
intermediate calculations. Round your answer to 2...

Sea Side, Inc., just
paid a dividend of $2.24 per share on its stock. The growth rate in
dividends is expected to be a constant 6.3 percent per year
indefinitely. Investors require a return of 20 percent on the stock
for the first three years, then a return of 15 percent for the next
three years, and then a return of 13 percent thereafter. What is
the current share price? (Do not round intermediate
calculations. Round your answer to 2...

Sea Side, Inc., just paid a dividend of $2.24 per share on its
stock. The growth rate in dividends is expected to be a constant
6.3 percent per year indefinitely. Investors require a return of 20
percent on the stock for the first three years, then a return of 15
percent for the next three years, and then a return of 13 percent
thereafter. What is the current share price? (Do not round
intermediate calculations. Round your answer to 2...

Sea Side, Inc., just paid a dividend of $1.68 per share on its
stock. The growth rate in dividends is expected to be a constant
5.5 percent per year indefinitely. Investors require a return of 18
percent on the stock for the first three years, then a return of 13
percent for the next three years, and then a return of 11 percent
thereafter. What is the current share price? (Do not round
intermediate calculations. Round your answer to 2...

Stock Values The next dividend payment by ECY, Inc., will be
$2.90 per share. The dividends are anticipated to maintain a growth
rate of 5.5 percent, forever. If the stock currently sells for
$53.10 per share, what is the required return?

1.
The Jackson-Timberlake Wardrobe Co. just paid a dividend of
$1.32 per share on its stock. The dividends are expected to grow at
a constant rate of 7 percent per year indefinitely.
Required:
(a)
If investors require a 15 percent return on The
Jackson-Timberlake Wardrobe Co. stock, what is the current price?
what will the price be in 17years?

1. Sky High Co. just paid a dividend of $2.0 per share on its
stock. The dividends are expected to grow at a constant rate of 2
percent per year indefinitely. If investors require an 8.6 percent
return on Sky High Co. stock, the current price is $ _________ .
Round it to two decimal places
2. Sky High Co. just paid a dividend of $4.6 per share on its
stock (D0). The dividends are expected to grow at a...

Suppose you know that a company’s stock currently sells for $70
per share and the required return on the stock is 15 percent. You
also know that the total return on the stock is evenly divided
between a capital gains yield and a dividend yield. If it’s the
company’s policy to always maintain a constant growth rate in its
dividends, what is the current dividend per share?

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