QUIZ 4 Question 1 If D1 = $6.9 g (which is constant) = 3.1% and P0 = $69.7 what is the required rate of return on the stock? That is solve for r. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 2 A stock is expected to pay a dividend of $1.3 at the end of the year. The required rate of return is rs = 19.7% and the expected constant growth rate is g = 7.4%. What is the stock’s current price? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 3 ABC just paid a dividend of D0 = $5.9. Analysts expect the company’s dividend to grow by 34% this year by 21% in Year 2 and at a constant rate of 6% in Year 3 and thereafter. The required return on this stock is 14%. What is the best estimate of the stock’s current market value? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 4 A stock just paid a dividend of D0 = $1.1. The required rate of return is rs = 11.2% and the constant growth rate is g = 7.7%. What is the current stock price? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 5 If D0 = $2.6 g = 8.2% and P0 = $70.8 what is the required rate of return on the stock? That is solve for r. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 6 ABC Enterprises’ stock is expected to pay a dividend of $0.3 per share. The dividend is projected to increase at a constant rate of 5.9% per year. The required rate of return on the stock is 19.6%. What is the stock’s expected price 3 years from today (i.e. solve for P3)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 7 If D1 = $5.68 and P0 = $23.4 what is the dividend yield? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 8 ABC Enterprises’ stock is currently selling for $53.9 per share. The dividend is projected to increase at a constant rate of 6.7% per year. The required rate of return on the stock is 12%. What is the stock’s expected price 5 years from today (i.e. solve for P5)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 9 The common stock of Wetmore Industries is valued at $26.1 a share. The company increases their dividend by 8 percent annually and expects their next dividend to be $1.8. What is the required rate of return on this stock? That is solve for r. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 10 The common stock of ABC Industries is valued at $37 a share. The company increases their dividend by 8.4 percent annually and expects their next dividend to be $1.3. What is the required rate of return on this stock? That is solve for r. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 11 ABC is expected to pay a dividend of $1.7 per share at the end of the year. The stock sells for $137 per share and its required rate of return is 15.4%. The dividend is expected to grow at some constant rate g forever. What is the growth rate (i.e. solve for g)? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example if your answer is 0.12345 then enter as 12.35 in the answer box. Question 12 ABC’s last dividend was $3. The dividend growth rate is expected to be constant at 25% for 3 years after which dividends are expected to grow at a rate of 5% forever. If the firm’s required return (rs) is 11% what is its current stock price (i.e. solve for Po)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 13 ABC Inc. is expected to pay an annual dividend of $2.9 per share next year. The required return is 12 percent and the growth rate is 8 percent. What is the expected value of this stock five years from now? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 14 ABC’s stock has a required rate of return of 19.8% and it sells for $73 per share. The dividend is expected to grow at a constant rate of 5.4% per year. What is the expected year-end dividend D1? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 15 ABC Company’s last dividend was $2.4. The dividend growth rate is expected to be constant at 27% for 2 years after which dividends are expected to grow at a rate of 7% forever. The firm’s required return (rs) is 12%. What is its current stock price (i.e. solve for Po)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 16 ABC’s last dividend paid was $1.8 its required return is 16.2% its growth rate is 4.6% and its growth rate is expected to be constant in the future. What is Sorenson’s expected stock price in 7 years i.e. what is P7? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box.
