A5-6

You purchased a share of XYZ stock at the end of 2007 for $95.00. By the end of 2017, the XYZ share price decreased to $81.29. In 2007 the annual dividend on XYZ stock was $1.28 per share. Over the next ten years, the dividend increased to $3.00 per share in 2017.

A. Using the 2007 values as your evaluation time period zero, what was the annual rate of escalation on the dividend of XYZ?

B. Again, using the 2007 stock price as your investment at time zero, what was the annual rate of de-escalation in the stock price?

C. Assume the annual dividend escalated each year at the Case "A" result. If you reinvest all the dividends received from 2008 through 2017 at an annual rate of 8% per year and sell the stock at the end of 2017 for $81.29, what would be your escalated dollar growth rate of return on your investment over the 10-year period?

D. If inflation averaged 1.75% each year for the same 10-year period, what would be your constant (or real) dollar growth rate of return on the overall investment from part C?

E. Using 2007 as a base year, what is the relative purchasing power of the 2017 future worth profit "F" you obtained from part C if inflation is the same 1.75% per year?