Consider the case of Urban Drapers Inc.: Urban Drapers Inc., a drapery company, has been successfully doing business for the past 15 years. It went public eight years ago and has been paying out a constant dividend of $2.56 per share every year to its shareholders. In its most recent annual report, the company informed investors that it expects to maintain its constant dividend into the foreseeable future and that dividends are not expected to increase. If you are an investor who requires a 12.44% rate of return and you expect dividends to remain constant forever, then your expected valuation for Urban Drapers' stock today is per share. (Note: Round your answer to two decimal places.) Urban Drapers has a sister company named Super Carpeting Inc. (SCI). SCI just paid a dividend (Do) of $1.92 per share, and its annual dividend is expected to grow at a constant rate (g) of 4.00% per year. If the required return (r.) on SCI's stock is 10.00 %, then the intrinsic value of SCI's shares is S per share. (Note: Do not round intermediate calculations. Round your final answer to two decimal places.) Which of the following statements is true about the constant dividend growth model? When using a constant growth model to analyze a stock, if an increase in the required rate of return (r.) occurs while the growth rate (g) L) remains the same, this will lead to an increased value of the stock. O When using a constant growth model to analyze a stock, if an increase in the required rate of return occurs while the growth rate remains the same, this will lead to a decreased value of the stock. Use the constant dividend growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.: per share. If SCI's stock is in equilibrium, the current expected dividend yield on the stock will be approximately, SCI's expected stock price one year from today will be approximately per share. If SCI's stock is in equilibrium, the current expected capital gains yield on SCI's stock will be approximately per share. The constant dividend growth valuation model uses the value of a firm's dividends in the numerator of the equation. Dividends are divided by the difference between investors' required return and the dividend growth rate, as follows: Po = D (-0). Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. Consider the case of Walter Utilities: Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter's stock currently trades for $28.00 per share, the average investor should expect to earn a return %. (Note: Round your answer to two decimal places.) of Walter's dividend is expected to grow at a constant growth rate of 6.50% per year. What do you expect to happen to Walter's expected dividend yield in the future? O It will decrease. It will stay the same. It will increase. A eBook DPS Calculation Thress Industries just paid a dividend of $2.50 a share (i.e., Do $2.50). The dividend is expected to grow 5% a year for the next 3 years and then 10% a year thereaf the expected dividend per share for each of the next 5 years? Do not round intermediate calculations. Round your answers to the nearest cent. D = $ D = $ DJ = $ D = $ D = $
