The next dividend payment by Firm C will be $2.56 per share. The dividends are a

Question

The next dividend payment by Firm C will be $2.56 per share. The dividends are anticipated to maintain a 2.5 percent growth rate, forever. If the stock currently sells for $42.83 per share, what is the required return? Express your answer as a percentage and round to four decimal places (e.g., 15.83% = 0.1583).

Firm S stock currently sells for $27.67 per share. The market requires a 18 percent return on the firm's stock, and the dividend to be paid one year from now is $2.28. The company maintains a constant growth rate in dividends. What is this growth rate? Express your answer as a percentage and round to four decimal places (e.g., 15.83% = 0.1583).

Firm T stock currently sells for $52.99 per share. The market requires a 12 percent return on the firm's stock, and the most recent annual dividend per share was $1.12. The company maintains a constant growth rate in dividends. What is this growth rate? Express your answer as a percentage and round to four decimal places (e.g., 15.83% = 0.1583).

Firm B paid a dividend of $4.2 per share this morning. Dividends are expected to grow at an annual rate of 10% per year for the next 3 years. After that, dividends will grow at 3.5% per year forever. What is the amount of the dividend that will be paid 8 years from now? Round your answer to the nearest cent.

Firm M intends to pay a dividend of $3.54 per share at the end of the year, $1.89 per share two years from now and $2.6 per share three years from now. If the required return on the stock is 3.9%, what is the net present value (i.e., sum of the present values) of these dividends? Round your answer to the nearest cent.

Explanation / Answer

Question 71

Price= D1/(Ke-g)

42.83= 2.56/(Ke-.025)

Ke= (2.56/42.83)+.025

Ke= required return= .0848 or8.48%

Question 81

Price= D1/(Ke-g)

27.67= 2.28/(.18-g)

.18-(2.28/27.67)= g

or g= .0976 or 9.76%

Question 92

Price= D1/(Ke-g)

52.99= [1.12*(1+g)]/(.12-g)

52.99(.12-g)= 1.12*(1+g)

6.3588-52.99g= 1.12+1.12g

6.3588-1.12= 1.12g+52.99g

5.2388= 54.11g

g= 5.2388/54.11

g= .0968 or 9.68%

Question 21

D8= 4.2x(1.1^3)x(1.035^5)

D8= $ 6.64

The net present value (i.e., sum of the present values) of these dividends

PV= (3.54/1.039)+(1.89/1.039^2)+(2.6/1.039^3)

PV= $7.48

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