9-1 Weston Corporation just paid a dividend of$1.00ashare(ie, Do = $1.00) DPS CA

Question

9-1 Weston Corporation just paid a dividend of$1.00ashare(ie, Do = $1.00) DPS CALCULATION The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? 9-2 Tresnan Brothers is expected to pay a $1.80 per share CONSTANT GROWTH VALUATION dividend at the end of the year (i.e, Di-$1.80). The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 10%, what is the stock's current value per share? 9-3 Holtzman Clothiers's stock currently sells for $38.00a CONSTANT GROWTH VALUATION share. It just paid a dividend of $2.00 a share (ie, Do = $2.00). The dividend is expected to grow at a constant rate of 5% a year, what stock price is expected 1 year from now? what is the required rate of return? 9-4 NONCONSTANT GROWTH VALUATION Holt Enterprises recently paid a dividend, Do, of $2.75. It expects to have nonconstant growth of 18% for 2 years followed by a constant rate of 6% thereafter. The firm's required return is 12%. a. How far away is the horizon date? b. What is the firm's horizon, or continuing, value? c. What is the firm's intrinsic value today, Po?

Explanation / Answer

Answer to Question No 9-1:

Current Dividend (D0) = $1.00
D1 = $1.00 * 1.12 = $1.12
D2 = $1.12 * 1.12 = $1.25
D3 = $1.25 * 1.12 = $1.40
D4 = $1.40 * 1.05 = $1.47
D5 = $1.47 * 1.05 = $1.54

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