8:39 ul LTE X FI 210 Chapter 11 HW DOC - 26 KB Name 1. A. What is the value of a stock, using the dividend growth model if the dividend is $3, your required rate of return is 8% and the annual rate of dividend growth is 3%? Answer B. What is the value of the stock in A. above if the dividend is decreased to $2.50? Answer C. What is the value of the stock in B. above if the required rate of return is lowered to 6%? Answer D. What is the value of the stock in A. above if the dividend growth rate increases to 5%? Answer E. What is the value of this stock if the dividend is increased to S3.25, the dividend growth rate is lowered to 4% and the required rate of return is 10%? Answer 2. XYZ stock sells for $25 and pays an annual per share dividend of $1.50. It is expected to grow annually at 8%. A. What is your expected return on this stock? Answer B. What would be the expected return if the stock price were S35? Answer re Open Office 3. The risk free rad ed return on the 8:39 ul LTE X FI 210 Chapter 11 HW DOC - 26 KB $3.25, the dividend growth rate is lowered to 4% and the required rate of return is 10%? Answer 2. XYZ stock sells for $25 and pays an annual per share dividend of $1.50. It is expected to grow annually at 8%. A. What is your expected return on this stock? Answer B. What would be the expected return if the stock price were S35? Answer FI 210 Chapter 11 Homework Page 2 3. The risk free rate of return is 2%. The expected return on the market is 6%. Stock M has a beta cocfficient of 1.4. The dividend growth rate is 5%. The dividend is $2.60 a chare. What should be the price of this stock? What should be the price of What is K? the stock? (Hint: First solve for K. Then use the K in the dividend growth model). 4. What is the value of a stock if it is earning $2.37 a share and the appropriate earnings per share multiple or P/E is 8? Answer Open Office