Business Finance Stocks Name___________________ 80 points ScoreMUST SHOW WORK1. Calculate the dividend for year 15 if Do is $2.50 and growth is 6%. D15 = $__________ (3 pts.)2. Calculate the dividend for each year from D1 through D5 assuming Do is $4 and growth is 7%. (10 pts.)D1 = $D2 = $D3 = $D4 = $D5 = $3. Calculate the price of the stock today if Do is $1.00 and growth is 6%. Assume the required rate of return on common stock rs is 10%. $_______(3 pts.)4. If you know that the required rate of return r on Stock A is 12% and the dividend yield is 5% what is the capital gains yield?_____% (2 pts.)5. If P1 is $24.61 and Po is $22.97 what is the capital gains yield? ______% (2 pts.) The total return r is 15%. What is the dividend yield? ______% (2 pts.)6. If the dividend D1 is $1.92 and Po is $23.50 what is the dividend yield? ____% If the total rate of return r is 14% what is the capital gains yield? _____% (2 pts. each)7. If the expected rate of return r is less than the required rate of return r should you buy the stock? Yes — No. Circle your answer. 2 pts. If you already own the stock should you keep it or sell it? Circle your answer. 2pts.8. The price of preferred stock X is $65.00 and the dividend per share is 7% of the par value of $100. Calculate the required rate of return on the preferred stock rp. _____% 4 pts.9. If the required rate of return on preferred stock Y with an $8 dividend is 12% what is the price of the stock? Vp = %___________ 4 pts.10. Stock Z will pay a dividend of $3.00 but forecasts no growth in the dividend. The current price of the stock Po is $30. Calculate the required rate of return rs. 4 pts.11. If the dividend on this no growth stock is $1.15 and rs is 13% calculate Po. 4 pts.12. If the growth rate (g) is 6% the price of the stock today (Po) is $24 the dividend today (Do) is $1.00 what is the dividend yield the capital gains yield and the total yield r (r = required rate of return or total yield). 6 pts. Dividend Yield ___________% Capital Gains Yield _____________% Total Yield (required rate of return) ______________%13. What is the expected price of Stock C four years from now if growth (g) is 6% and the investors are requiring 11% (the required rate of return r is 11%) and the current dividend Do is $1.75. Calculate expected P4. 5 pts.14. Suppose the dividend today Do is $2.50 and the growth rate (g) is expected to be 25% for the next three years followed by a normal growth rate (g) of 6% thereafter. Assume the investors require 13% rs. Calculate the value of the stock today Po. This is the supernormal growth problem. 25 pts
Homework 121
Business Finance Stocks Name___________________ 80 points ScoreMUST SHOW WORK1. Calculate the dividend for year 15 if Do is $2.50 and growth is 6%. D15 = $__________ (3 pts.)2. Calculate the dividend for each year from D1 through D5 assuming Do is $4 and growth is 7%. (10 pts.)D1 = $D2 = $D3 = $D4 = $D5 = $3. Calculate the price of the stock today if Do is $1.00 and growth is 6%. Assume the required rate of return on common stock rs is 10%. $_______(3 pts.)4. If you know that the required rate of return r on Stock A is 12% and the dividend yield is 5% what is the capital gains yield?_____% (2 pts.)5. If P1 is $24.61 and Po is $22.97 what is the capital gains yield? ______% (2 pts.) The total return r is 15%. What is the dividend yield? ______% (2 pts.)6. If the dividend D1 is $1.92 and Po is $23.50 what is the dividend yield? ____% If the total rate of return r is 14% what is the capital gains yield? _____% (2 pts. each)7. If the expected rate of return r is less than the required rate of return r should you buy the stock? Yes — No. Circle your answer. 2 pts. If you already own the stock should you keep it or sell it? Circle your answer. 2pts.8. The price of preferred stock X is $65.00 and the dividend per share is 7% of the par value of $100. Calculate the required rate of return on the preferred stock rp. _____% 4 pts.9. If the required rate of return on preferred stock Y with an $8 dividend is 12% what is the price of the stock? Vp = %___________ 4 pts.10. Stock Z will pay a dividend of $3.00 but forecasts no growth in the dividend. The current price of the stock Po is $30. Calculate the required rate of return rs. 4 pts.11. If the dividend on this no growth stock is $1.15 and rs is 13% calculate Po. 4 pts.12. If the growth rate (g) is 6% the price of the stock today (Po) is $24 the dividend today (Do) is $1.00 what is the dividend yield the capital gains yield and the total yield r (r = required rate of return or total yield). 6 pts. Dividend Yield ___________% Capital Gains Yield _____________% Total Yield (required rate of return) ______________%13. What is the expected price of Stock C four years from now if growth (g) is 6% and the investors are requiring 11% (the required rate of return r is 11%) and the current dividend Do is $1.75. Calculate expected P4. 5 pts.14. Suppose the dividend today Do is $2.50 and the growth rate (g) is expected to be 25% for the next three years followed by a normal growth rate (g) of 6% thereafter. Assume the investors require 13% rs. Calculate the value of the stock today Po. This is the supernormal growth problem. 25 pts
