Chapter 8: Stock Valuation

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The next dividend payment by Hot Wings, Inc., will be $4.85 per share. The dividends are anticipated to maintain a 2 percent growth rate forever.

Required:

If the stock currently sells for $43 per share, what is the required return?

2.00%

11.28%

12.62%

13.28%

13.01%

Metroplex Corporation will pay a $3.10 per share dividend next year. The company pledges to increase its dividend by 5.50 percent per year indefinitely.

Required:

If you require an 13.40 percent return on your investment, how much will you pay for the company's stock today?

$40.81

$37.19

$15.55

$39.24

$37.67

Antiques R Us is a mature manufacturing firm. The company just paid a $13 dividend, but management expects to reduce the payout by 9 percent per year indefinitely.

Required :

If you require an 15 percent return on this stock, what will you pay for a share today?

$54.17

$49.78

$197.17

$48.80

$49.29

E-Eyes.com Bank just issued some new preferred stock. The issue will pay a $19 annual dividend in perpetuity, beginning 9 years from now.

Required :

If the market requires a 7 percent return on this investment, how much does a share of preferred stock cost today?

$271.43

$147.64

$165.87

$157.97

$150.08

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 12 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $9 per share dividend in 13 years and will increase the dividend by 7 percent per year thereafter.

Required:

If the required return on this stock is 13 percent, what is the current share price? (Do not round your intermediate calculations.)

$34.61

$32.88

$30.62

$36.34

$35.64

Antiques R Us is a mature manufacturing firm. The company just paid a $17 dividend, but management expects to reduce the payout by 12 percent per year indefinitely.

Required :

If you require an 20 percent return on this stock, what will you pay for a share today?

$53.12

$47.22

$46.28

$187.00

$46.75

Teder Corporation stock currently sells for $95 per share. The market requires a 16 percent return on the firm's stock.

Required :

If the company maintains a constant 8 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

$22.88

$7.60

$6.76

$7.04

$9.32