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1. Favored stock will pay a dividend this year of $3.40 per share. Its dividend yield is 20%. At what price is the stock selling?

1. Favored stock will pay a dividend this year of $3.40 per share. Its dividend yield is 20%. At what price is the stock selling?(Round your answer to 2 decimal places.)

2. Preferred Products has issued preferred stock with an annual dividend of $5.60 that will be paid in perpetuity.

a.If the discount rate is 10.00%, at what price should the preferred sell?(Round your answer to 2 decimal places.)

b.At what price should the stock sell 1 year from now?(Round your answer to 2 decimal places.)

c.What is the dividend yield, the capital gains yield, and the expected rate of return of the stock?(Enter your answers as a whole percent.)

Dividend yield

%

Capital gains yield

%

Expected rate of return

%

3. Steady As She Goes Inc. will pay a year-end dividend of $2.60 per share. Investors expect the dividend to grow at a rate of 6% indefinitely.

a.If the stock currently sells for $26.00 per share, what is the expected rate of return on the stock?(Do not round intermediate calculations. Enter your answer as a whole percent.)

b.If the expected rate of return on the stock is 18.50%, what is the stock price?(Do not round intermediate calculations.)

4. Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 10%. Its expected earnings this year are $4 per share. Complete the following table.(Do not round intermediate calculations. Enter the growth rate as a whole percent

Plowback Ratios

Growth Rate

Stock Price

P/E Ratio

a.

0

%

b.

0.05

%

c.

0.08

%

5. Arts and Crafts, Inc. will pay a dividend of $2 per share in 1 year. It sells at $40 a share, and firms in the same industry provide an expected rate of return of 12%. What must be the expected growth rate of the company's dividends?(Do not round intermediate calculations. Enter your answer as a whole percent.)

Expected growth rate

%

No-Growth Industries pays out all of its earnings as dividends. It will pay its next $2 per share dividend in a year. The discount rate is 11%.

a.What is the price-earnings ratio of the company?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

b.What would the P/E ratio be if the discount rate were 10%?(Round your answer to 2 decimal places.)

image text in transcribed 1. Favored stock will pay a dividend this year of $3.40 per share. Its dividend yield is 20%. At what price is the stock selling? (Round your answer to 2 decimal places.) 2. Preferred Products has issued preferred stock with an annual dividend of $5.60 that will be paid in perpetuity. a. If the discount rate is 10.00%, at what price should the preferred sell? (Round your answer to 2 decimal places.) b. At what price should the stock sell 1 year from now? (Round your answer to 2 decimal places.) c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock? (Enter your answers as a whole percent.) Dividend yield % Capital gains yield % Expected rate of return % 3. Steady As She Goes Inc. will pay a year-end dividend of $2.60 per share. Investors expect the dividend to grow at a rate of 6% indefinitely. a. If the stock currently sells for $26.00 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. If the expected rate of return on the stock is 18.50%, what is the stock price? (Do not round intermediate calculations.) 4. Stormy Weather has no attractive investment opportunities. Its return on equity equals the discount rate, which is 10%. Its expected earnings this year are $4 per share. Complete the following table. (Do not round intermediate calculations. Enter the growth rate as a whole percent Plowback Ratios Growth Rate Stock Price P/E Ratio a. 0 % b. 0.05 % c. 0.08 % 5. Arts and Crafts, Inc. will pay a dividend of $2 per share in 1 year. It sells at $40 a share, and firms in the same industry provide an expected rate of return of 12%. What must be the expected growth rate of the company's dividends? (Do not round intermediate calculations. Enter your answer as a whole percent.) Expected growth rate % NoGrowth Industries pays out all of its earnings as dividends. It will pay its next $2 per share dividend in a year. The discount rate is 11%. a. What is the priceearnings ratio of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would the P/E ratio be if the discount rate were 10%? (Round your answer to 2 decimal places.)

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