Question
A) Axxon Inc. is expected to pay a $0.85 per share dividend at the end of the year (i.e., D1 = $0.85). The dividend is
A) Axxon Inc. is expected to pay a $0.85 per share dividend at the end of the year (i.e., D1 = $0.85). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rs, is 14%. What is the value of a share of the companys stock? Round your answer to the nearest cent.
B) Pic-A-Shoes stock currently sells for $45. The stock just paid a dividend of $2.25; that is, D0 = $2.25. The dividend is expected to grow at a constant rate of 8% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent.
What is the required rate of return? Round your answer to two decimal places.
C) Assume that an average firm in your companys industry is expected to grow at a constant rate of 6% and has a dividend yield of 5%. Your company is of average risk, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% [D1 = D0(1 + g) = D0(1.50)] this year, and 25% the following year, after which growth should match the 6% industry average rate. The last dividend paid (D0) was $2.00. What is the value per share of your firms stock today? (Hint: Use Equation to find the required rate of return.) Do not round intermediate calculations. Round your answer to the nearest cent.
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