Complete tabs 9.6, 9.10, 9.14, 9.22, 9.31, and STP 9.5 in the attached Chapter 9 Excel spreadsheet. An EXAMPLE tab is provided in the spreadsheet for your guidance. You must use formulas in the spreadsheet to show your work

9.5 Present value of dividends: Fresno Corp. is a fast-growing company that expects to grow at a rate of 30 percent over the next two years and then slow down to a growth rate of 18 percent for the following three years. If the last dividend paid by the company was $2.15, estimate the dividends for the next five years. Compute the present value of these dividends if the required rate of return was 14 percent. Growth rate in Phase 1 Number of years in phase 1 Growth rate in phase 2 Number of years in phase 2 Required rate of return Last paid dividend 30% 2 18% 3 14% $2.15 D1 2.80 D2 3.63 D3 4.29 D4 5.06 D5 5.9699568 $14.24 Present value of the dividends Year 1 2 3 4 5 CFs 2.8 3.63 4.29 5.06 5.97 14.00% PVIF 0.87719 0.76947 0.67497 0.59208 0.51937 PV 2.4561404 2.7931671 2.8956278 2.9959262 3.1006309 14.241492 Present Value of the Dividends 9.6 Zero growth: Nynet, Inc., paid a dividend of $4.18 last year. The company does not expect to increase its dividend for the next several years. If the required rate of return is 18.5 percent, what is the current price of the stock? 9.7 Zero growth: Knight Supply Corp. has not grown for the past several years and expects this lack of of growth to continue. The firm last paid a dividend of $3.56. If you require a rate of return of 13 percent, what is the current stock price? 9.8 Zero growth: Ron Santana is interested in buying the stock of First National Bank. While the bank expects no growth in the near future, Ron is attracted by the dividend income. Last year the bank paid a dividend of $5.65. If Ron requires a return of 14 percent on such stocks, what is the maximum price he should be willing to pay for a share of the bank's stock? 9.9 Zero growth: The current stock price of Largent, Inc., is $44.72. If the required rate of return is 19 percent, what is the dividend paid by this firm, if the dividend is not expected to grow in the near future? 9.10 Constant growth: Moriband Corp. paid a dividend of $2.15 yesterday. The company's dividend is expected to grow at a steady rate of 5 percent for the next several years. If stocks of companies like Moriband require a rate of return of 15 percent, what should be the market price of Moribund stock? 9.11 Constant growth: Nyeil, Inc., is a consumer products firm growing at a constant rate of 6.5 percent. The firm's last dividend was $3.36. If the required rate of return is 18 percent, what is the market value of this stock? 9.12 Constant growth: Reco Corp. is expected to pay a dividend of $2.25 next year. The forecast for the stock price a year from now is $37.50. If the required rate of return is 14 percent, what is the current stock price? Assume constant growth. 9.13 Constant growth: Proxicam, Inc., is expected to grow at a constant rate of 7 percent. If the company's next dividend, which will be paid in a year, is $1.15 and its current stock price is $22.35, what is the required rate of return on this stock? 9.14 Preferred stock valuation: X-Centric Energy Company has issued perpetual preferred stock with a stated (par) of $100 and a dividend of 4.5 percent. If the required rate of return is 8.25 percent, what is the stock's current market price? 9.15 Preferred stock valuation: The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.6 percent? 9.16 Preferred stock: The preferred stock of Axim Corp. is selling currently at $47.13. If the required rate of return is 12.2 percent, what is the dividend paid by this stock? 9.17 Preferred stock: Each quarter, Sirkota, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $63.37. If the required rate of return for such stocks is 15.5 percent, what is the quarterly dividend paid by this firm? 9.18 Constant growth: Kay Williams is interested in purchasing the common stock of Reckers, Inc., which is currently priced at $37.45. The company expects to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 7 percent. a. What should the market value of the stock be if the required rate of return is14 percent? b. Is this a good buy? Why or why not? 9.19 Constant growth: Your required rate of return is 23 percent. Ninex Corp. has just paid a dividend of $3.12 and is expected to increase its dividend at a constant rate of 5 percent. What is the expected price of the stock three years from now? 9.20 Constant growth: Jenny Banks is interested in buying the stock of Fervan, Inc., which is growing at a constant rate of 6 percent. Last year the firm paid a dividend of $2.65. The required rate of return is 16 percent. What is the current value of this stock? What should be the price of the stock in year 5? 9.21 Constant Growth: You own shares of Old World DVD Company and are interestedin selling them. With so many people downloading music these days, sales, profits, and dividends at Old World have been declining 6 percent per year. The firm just paid a dividend of $1.15 per share. The required rate of return for a stock this risky is 15 percent. If dividends are expected to decline at 6 percent per year what is a share of the stock worth today? 9.22 Nonconstant growth: You own a company that competes with Old World DVD Company (in the previous problem). Instead of selling DVDs, however, your company sells music downloads from a web site. Things are going well now, but you know that it is only a matter of time before someone comes up with a better way to distribute music. Your company just paid a $1.50 per share dividend and you expect to increase the dividend 10 percent next year. However, you then expect your dividend growth rate to begin going down to 5 percent the following year, 2 percent the next year, and to -3 percent per year thereafter. Based upon these estimates, what is the value of your company's stock? Assume the required rate of return is 12 percent. 9.23 Nonconstant growth: Tre-Bien, Inc., is a fast-growing technology company. The firm projects a rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, the firm expects a constant growth rate of 8 percent. The firm expects to pay its first dividend of $2.45 a year from now. If the required rate of return on stocks with similar risk is 22 percent, what is the current price of the stock? 9.24 Nonconstant growth: ProCor, a biotech firm, has forecast the following growth rates for the next three years: 35 percent, 28 percent, and 22 percent. The company then expects to grow at a constant rate of 9 percent forever. The company paid a dividend of $1.75 last week. If the required rate of return is 20 percent, what is the value of this stock? 9.25 Nonconstant growth: Revarop, Inc., is a fast-growth company that is expected to grow at a rate of 23 percent for the next four years. It is then expected to grow at a constant rate of 6 percent. Revarop's first dividend of $4.25 will be paid in year 3. If the required rate of return is 17 percent, what is the current value of the stock if dividends are expected to grow at the same rate as the company? 9.26 Nonconstant growth: Quansi, Inc., expects to pay no dividends for the next six years. It has projected a growth rate of 25 percent for the next seven years. After seven years, the firm will grow at a constant rate of 5 percent. Its first dividend, to be paid in year 7, will be worth $3.25. If the required rate of return is 24 percent, what is the stock worth today? 9.27 Nonconstant growth: Staggert Corp. will pay dividends of $5, $6.25, $4.75, and $3 for the next four years. Thereafter, the company expects its growth rate to be constant rate at 6 percent. If the required rate of return is 18.5 percent, what is the current value of the stock? 9.28 Nonconstant growth: Diaz Corp. is expected to grow rapidly at a rate of 35 percent for the next seven years. The first dividend, to be paid three years from now, will be $5. After seven years, the company (and the dividends it pays) will grow at a rate of 8.5 percent. What is the value of this stock with a required rate of return of 14 percent? 9.29 Nonconstant growth: Tin-Tin Waste Management, Inc., is growing rapidly. Dividends are expected to grow at rates of 30 percent, 35 percent, 25 percent, and 18 percent over the next four years. Thereafter the company expects dividends to grow at a constant rate of 7 percent. The stock is currently selling at $47.85, and the required rate of return is 16 percent. Compute the dividend for the current year (D0). 9.30 Equation 9.4 shows the relation between a stock's value and the dividend that is expected next year if the dividends are also expected to grow at a constant rate forever. If a firm pays all of its earnings as dividends, show how Equation 9.4 can be rearranged to calculate that firm's P/E ratio. What does this tell us about the factors that determine a firm's P/E ratio? 9.31 Riker Departmental Stores have forecasted a high growth rate of 40 percent for the next two years, followed by growth rates of 25 percent and 20 percent for the following two years. It then expects growth to stabilize at a constant rate of 7.5 percent forever. The firm paid a dividend of $3.50 recently. If the required rate of return is 18 percent, what is the current value of Riker's stock? 9.32 Courtesy Bancorp issued perpetual preferred stock a few years ago. The bank pays an annual dividend of $4.27 and your required rate of return is 12.2 percent. a. What is the value of the stock given your required rate of return? b. Should you buy this stock if its current market price is $34.41? Explain. 9.33 Rhea Kirby owns shares in Ryoko Corp. Currently the market price of the stock is $36.34. The company expects to grow at a constant rate of 6 percent for the foreseeable future. Its last dividend was worth $3.25. Rhea's required rate of return for such stocks is 16 percent. She wants to find out whether she should sell her shares or add to her holdings. a. What is the value of this stock? b. Based on your answer above, should Rhea buy additional shares in Ryoko Corp? Why or why not? 9.34 Perry, Inc., declared a dividend of $2.50 yesterday. You are interested in investing in this company, which has forecasted a constant growth rate of 7 percent for its dividends forever. The required rate of return is 18 percent. a. b. c. d. Compute the expected dividends D1, D2, D3, and D4. Compute the present value of these four dividends. What is the expected value of the stock four years from now (P4)? Calculate the present value of P4. Add the answer you got in part b. What is the value of the stock today? Use the equation for constant growth (Equation 9.4) to compute the price of the stock today. e. 9.35 Zweite Pharma is a fast-growing drug company. The company forecasts that in the next three years, its dividend growth rates will be 30 percent, 28 percent, and 24 percent, respectively. Last week it paid a dividend of $1.67. After three years, the company expects dividend growth to stabilize at a rate of 8 percent. The required rate of return is 14 percent. a. Compute the dividends for the next three years, and find its present value. b. Calculate the price of the stock at the end of year 3, when the firm settles to a constant growth rate. c. What is the current price of the stock? 9.36 Triton Inc. expects to grow at a rate of 22 percent for the next five years then settle to a constant growth rate of 6 percent. The company recently paid a dividend of $2.35. The required rate of return is 15 percent. a. Find the present value of the dividends during the rapid-growth period if dividends grow at the same rate as the company. b. What is the value of the stock at the end of year 5? c. What is the value of the stock today? 9.37 a. b. c. d. Ceebros Builders is expanding very fast and expects to grow at a rate of 25 percent for the next four years. The company recently paid a dividend of $3.60 but does not expect to pay any dividends for the next three years. In year 4, it intends to pay a $5 dividend and thereafter to increase its divdidend at a constant rate of 6 percent. The required rate of return on such stocks is 20 percent. Calculate the present value of the dividends during the fast-growth period. What is the value of the stock at the end of the fast-growth period (P4)? What is the value of the stock today? Would today's stock value be driven by the length of time you intend to hold the stock? STP #9.3 Burnes, Inc. is a mature firm that is growing at a constant rate of 5.5 percent per year. The last dividend that the firm paid was $1.50 per share. If dividends are expected to grow at the same rate as the firm and the required rate of return of Burne's stock is 12 percent, what is the market value of the company's stock? STP #9.4 Abacus Corporation will pay dividends of $2.25, $2.95, and $3.15 in the next three years. After three years, the dividends are expected to grow at a constant rate of 4 percent per year. If the required rate of return is 14.5 percent, what is the current value of the Abacus common stock? STP #9.5 The preferred stock of Wellcare Inc. is currently trading at $137.50 per share. If the required rate of return is 8 percent and this stock has no maturity date, what is the quarterly divident paid by this stock? What is the quarterly dividend if the stock will mature in one year and it has a par value of $140