|
If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today?
Q.2
|
Raffalovich, Inc., is expected to maintain a constant 5.45 percent growth rate in its dividends, indefinitely.
|
| Required: |
|
If the company has a dividend yield of 3.95 percent, what is the required return on the company’s stock?
Q.3
| You’ve collected the following information from your favorite financial website. |
| |
52-Week Price
|
Stock (Div) |
Div
Yld % |
PE
Ratio |
Close
Price |
Net
Chg |
| Hi |
Lo |
| 79.3 |
10.62 |
Palm Coal 0.55 |
3.5 |
6 |
15.80 |
–0.24 |
| 55.81 |
33.42 |
Lake Lead Grp 1.54 |
3.8 |
10 |
40.43 |
–0.01 |
| 130.93 |
69.50 |
SIR 2.00 |
2.2 |
10 |
88.97 |
3.07 |
| 50.24 |
13.95 |
DR Dime 0.80 |
5.2 |
6 |
15.43 |
–0.26 |
| 35.00 |
20.74 |
Candy Galore 0.32 |
1.5 |
28 |
?? |
0.18 |
|
| |
|
According to your research, the growth rate in dividends for Palm Coal for the previous 10 years has been 4.25 percent.
|
| |
| Required: |
|
If investors feel this growth rate will continue, what is the required return for Palm Coal stock?
Q.4
|
Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.10, but management expects to reduce the payout by 5 percent per year, indefinitely.
|
| |
| Required: |
|
If you require a return of 11 percent on this stock, what will you pay for a share today?
|
|
|
|
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