Question
1. Consider a firm that had been priced using a 12 percent growth rate and a 14 percent required return. The firm recently paid a
1. Consider a firm that had been priced using a 12 percent growth rate and a 14 percent required return. The firm recently paid a $1.85 dividend. The firm just announced that because of a new joint venture, it will likely grow at a 12.5 percent rate.
How much should the stock price change (in dollars and percentage)? (Round your answers to 2 decimal places.) |
2. New York Times Co. (NYT) recently earned a profit of $3.01 per share and has a P/E ratio of 20.10. The dividend has been growing at a 6.00 percent rate over the past six years.
If this growth rate continues, what would be the stock price in four years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 25 in four years? (Round your answers to 2 decimal places.) |
Stock price | $ |
Stock price with new P/E | $ |
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3. A preferred stock from Hecla Mining Co. (HLPRB) pays $4.40 in annual dividends.
If the required return on the preferred stock is 7.40 percent, what is the value of the stock? (Round your answer to 2 decimal places.) |
4. A fast-growing firm recently paid a dividend of $0.40 per share. The dividend is expected to increase at a 25 percent rate for the next four years. Afterwards, a more stable 10 percent growth rate can be assumed.
If an 11.5 percent discount rate is appropriate for this stock, what is its value? (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
5.Assume on a given day in March, the Dow Jones Industrial Average reached a new low at a close of 7,247.40, which was down 94.24 that day. |
What was the return (in percent) of the stock market that day? (Negative answer should be indicated by a minus sign. Round your answer to 2 decimal places.)
6. A firm does not pay a dividend. It is expected to pay its first dividend of $0.22 per share in three years. This dividend will grow at 7 percent indefinitely. Use an 8 percent discount rate.
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