1)Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?

2)Summers Corp. currently has an EPS of $2.20, and the benchmark PE for the company is 21. Earnings are expected to grow at 10 percent per year.

a.

What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current stock price $

b.

What is the target stock price in one year? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Target stock price $

c.

Assuming the company pays no dividends, what is the implied return on the companys stock over the next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Implied return of stock %

ReferenceseBook & Resources

WorksheetDifficulty: IntermediateSection: 8.1 Common Stock Valuation