Finance HW 20 questions.

1.value:

5.00 points

The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.10 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return of 11 percent on the company’s stock.

What is the current stock price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current price $

What will the stock price be in three years? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

What will the stock price be in 14 years? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

2.value:

5.00 points

The next dividend payment by Blue Cheese, Inc., will be $1.88 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $37 per share, what is the required return? (Round your answer to 2 decimal places. (e.g., 32.16))

Required return %

3.value:

5.00 points

The next dividend payment by Blue Cheese, Inc., will be $1.44 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $26 per share.

What is the dividend yield? (Round your answer to 2 decimal places. (e.g., 32.16))

Dividend yield %

What is the expected capital gains yield?

Capital gains yield %

4.value:

5.00 points

Staal Corporation will pay a $2.54 per share dividend next year. The company pledges to increase its dividend by 3.5 percent per year indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

5.value:

5.00 points

Keenan Co. is expected to maintain a constant 5.0 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the required return on the company’s stock? (Round your answer to 2 decimal places. (e.g., 32.16))

Required return %

6.value:

5.00 points

Suppose you know that a company’s stock currently sells for $66 per share and the required return on the stock is 11 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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Current dividend per share $

7.value:

5.00 points

Apocalyptica Corp. pays a constant $9.50 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

8.value:

5.00 points

Lane, Inc., has an issue of preferred stock outstanding that pays a $6.35 dividend every year in perpetuity. If this issue currently sells for $92 per share, what is the required return? (Round your answer to 2 decimal places. (e.g., 32.16))

Required return %

9.value:

5.00 points

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $2.70 next year. The growth rate in dividends for all three companies is 5 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectively. What is the stock price for each company? (Round your answers to 2 decimal places. (e.g., 32.16))

Stock price

Red, Inc. $

Yellow Corp. $

Blue Company $

10.value:

5.00 points

Great Pumpkin Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Current share price $

11.value:

5.00 points

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $15 per share dividend in 10 years and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 10.5 percent, what is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Current share price $

12.value:

5.00 points

Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $8 per share and has announced that it will increase the dividend by $4 per share for each of the next five years, and then never pay another dividend. If you require a return of 11 percent on the company’s stock, how much will you pay for a share today? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

13.value:

5.00 points

Lohn Corporation is expected to pay the following dividends over the next four years: $12, $9, $8, and $3.50. Afterward, the company pledges to maintain a constant 7 percent growth rate in dividends forever. If the required return on the stock is 14 percent, what is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

14.value:

5.00 points

Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 12 percent and the company just paid a dividend of $1.60, what is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

15.value:

5.00 points

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $10.65, but management expects to reduce the pay out by 5 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today? (Round your answer to 2 decimal places. (e.g., 32.16))

Current share price $

16.value:

5.00 points

Feeback Corporation stock currently sells for $29 per share. The market requires a return of 11.2 percent on the firm’s stock. If the company maintains a constant 3.6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Dividend paid per share $

17.value:

5.00 points

E-Eyes.com Bank just issued some new preferred stock. The issue will pay an annual dividend of $29 in perpetuity, beginning 18 years from now. If the market requires a return of 4.3 percent on this investment, how much does a share of preferred stock cost today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Stock price $

18.value:

5.00 points

Thirsty Cactus Corp. just paid a dividend of $2.60 per share. The dividends are expected to grow at 18 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 13 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

19.value:

5.00 points

Chartreuse County Choppers Inc. is experiencing rapid growth. The company expects dividends to grow at 15 percent per year for the next 11 years before leveling off at 6 percent into perpetuity. The required return on the company’s stock is 14 percent. If the dividend per share just paid was $2.07, what is the stock price? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price $

20.value:

5.00 points

Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and will then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on Storico stock is 14 percent, what will a share of stock sell for today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Stock price $