Question

1) A stock just paid a dividend of $0.50. If the dividend is expected to grow 3% per year, what will the price be if the required return is 9%?

2) A stock is expected to pay a dividend of $1 at the end of the year. The required rate of return is 11%, and the expected growth rate is 5%. What is the current stock price?

3) A stock just paid a dividend of $1. The required rate of return is 11%, and the growth rate is 5%. What is the current stock price?

4) Mark Walker Inc. plans to issue preferred stock with a perpetual annual dividend of $1.5 per share. If the required return on this stock is currently 7%, what should be the stock’s market value?

5) A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 7%, and if investors require an 11% rate of return, what is the price of the stock?

Answer #1

1)

Price = D1 / required rate - growth rate

Price = (0.5 * 1.03) / 0.09 - 0.03

Price = 0.515 / 0.06

**Price = $8.58**

2)

Current price = D1 / required rate - growth rate

Current price = 1 / 0.11 - 0.05

Current price = 1 / 0.06

**Current price = $16.67**

3)

Price = D1 / required rate - growth rate

Price = (1 * 1.05) / 0.11 - 0.05

Price = 1.05 / 0.06

**Price = $17.5**

4)

Stock's market value = Annual dividend / required rate

Stock's market value = 1.5 / 0.07

**Stock's market value = $21.43**

5)

Price = D1 / required rate - growth rate

Price = (2 * 1.07) / 0.11 - 0.07

Price = 2.14 / 0.04

**Price = $53.5**

1. A stock just paid a dividend of $4.73 and is expected to
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indefinitely. If the current stock price is $84, what is the
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2. Gnomes R Us just paid a dividend of $1.95 per share. The
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A) Hubbard Industries just paid a common dividend, D0, of $2.00.
It expects to grow at a constant rate of 4% per year. If investors
require a 9% return on equity, what is the current price of
Hubbard's common stock? Do not round intermediate calculations.
Round your answer to the nearest cent.
B) Carlysle Corporation has perpetual preferred stock
outstanding that pays a constant annual dividend of $1.20 at the
end of each year. If investors require an 7% return...

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Carlysle Corporation has perpetual preferred stock outstanding
that pays a constant annual dividend of $1.30 at the end of each
year. If investors require an 6% return on the preferred stock,
what is the price of the firm's perpetual preferred stock?...

The OWB Company paid $2.1 of dividends this year. If its
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what is the expected dividend per share for OWB five years from
today?
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Consider...

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indefinitely. The required rate of return is 10%.
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A share of common stock has just paid a dividend of $2.00. If
the expected long-run growth rate for this stock is 5.00%, and if
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appropriate mathematical model to solve the problem. (iii)
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A stock just paid an annual dividend of $7.9. The dividend is
expected to grow by 6% per year for the next 4 years. In 4 years,
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Part 1
What should be the current stock price?

Your company just paid a dividend of $2.00. The growth rate is
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3% in year 8.
The required rate of return is 12%.
What is the stock price if the dividend growth rate will stay 3%
forever after 8 years?

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