1. 1. Suppose the company just paid dividend of $1. The dividends are expected to grow at 20% in Year 1 and 15% in Year 2. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.
2. 2. Suppose the company just paid dividend of $1. The dividends are expected to grow at 25% in Year 1 and 20% in Year 2, and 15% in Year 3. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.
3. 3.SupposethecompanywillnotpayanydividendsinYears1and2.Supposethatthecompanypaysdividendof$1inYear3andafterthatthedividendswillgrowat20%forthenexttwoyears.Afterthatthedividendswillgrowataconstantrateof5%forever.Iftherequiredrateofreturnis10%,computetoday'spriceofthestock.
4. 4. ABCIndustries will pay a dividend of $2 next year on their commonstock. The company predicts that the dividend will increase by 5% each yearindefinitely. What is the dividend yield if the stock is selling for $50 a share? What is the required rate of return?
5. 5. The dividends are expected to grow at 7% per year in the future. ABC's common stock sells for $23 per share and its last dividend was $2. What is the cost of equity? What is the dividend yield?