Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Houston Inc. is planning to pay a dividend of $2.82 per share next year. The company promises to increase its dividend by 3 percent

1. Houston Inc. is planning to pay a dividend of $2.82 per share next year. The company promises to increase its dividend by 3 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the companys stock today?

2. Sabita, Inc., will pay $1.60 per share next year. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $30 per share.

a. What is the dividend yield?

b. What is the expected capital gains yield?

3. Global Tech Co. plans to maintain a constant 4.8 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.6 percent, what is the required return on the companys stock?

4. Designs, Inc., has an issue of preferred stock outstanding that pays a $4.35 dividend every year in perpetuity. If this issue currently sells for $95 per share, what is the required return?

5. Sweet Treats, Inc., is planning to pay no dividends on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $10 per share 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 11 percent, what is the current share price?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets And Institutions

Authors: Stanley Eakins Frederic Mishkin

9th Global Edition

1292215003, 978-1292215006

More Books

Students also viewed these Finance questions

Question

Is SHRD compatible with individual career aspirations

Answered: 1 week ago