1. Weisbro and Sons common stock sells for $50 a share and pays an annual divide

Question

1. Weisbro and Sons common stock sells for $50 a share and pays an annual dividend that increases by 5.3 percent annually. The market rate of return on this stock is 9.30 percent. What is the amount of the last dividend paid by Weisbro and Sons?

$2.11

$1.90

$4.42

$2.52

$1.85

2.

The common stock of Eddie's Engines, Inc. sells for $43.88 a share. The stock is expected to pay $2.30 per share next year. Eddie's has established a pattern of increasing their dividends by 4.4 percent annually and expects to continue doing so. What is the market rate of return on this stock?

19.08 percent

5.44 percent

12.33 percent

5.24 percent

9.64 percent

3.

$0.78

$0.81

$1.15

$1.19

$1.23

4.

Railway Cabooses just paid its annual dividend of $4.50 per share. The company has been reducing the dividends by 12.7 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 14 percent?

$18.99

$15.05

$14.71

$19.77

$35.43

5.

The Red Bud Co. pays a constant dividend of $1.80 a share. The company announced today that it will continue to do this for another 2 years after which time they will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 7.4 percent?

$3.24

$1.93

$3.60

$5.04

$2.00

6.

Charles Berkeley, Inc. just paid an annual dividend of $3.60 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. If investors require an 11 percent return on this stock, what will the price be in 12 years?

$91.71

$93.62

$95.75

$98.15

$102.57

Explanation / Answer

1.$1.90

Calculation of last dividend paid :

As per dividend Growth formula :

Expected dividend = Current Price * (Required rate – Growth rate)

= 50 * (9.3% -5.3%)

= 50 * 0.04

= $2

Last dividend   = Expected dividend / (1+ Growth rate )

=2 /(1+0.053%)

=2/1.053

= $1.899 or 1.90

2.9.64 percent

dividend =2.30

growth=4.4

price=43.88

ke= 9.64%

3.

ke= 9.64%

3.

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