Problem 11-18 - Dividend Discount Model: A company paid a $1.9 per-share-per-year dividend last year. It is expected to increase at an annual 9% growth rate to year five. After year five, the dividend will grow at 6% per year indefinitely. Suppose that the required rate of return is 10%. What is the value of the stock?

Problem 12-5 Preferred Stock Price

Suppose that a preferred stock is paying an annual dividend of $4.00, has a 8% rate of return, and is callable in 10 years at a price of $210.

Dividend	$4.00
Discount rate	8%
n	10
Pn	$210

What should be the price of each share?

Problem 11-16 - Dividend Discount Model

In three years, a company is expected to pay its first dividend of $1.63 per share per year. At that point, the dividend is expected to grow at 8% per year indefinitely. Also suppose the required rate of return is 10%.

Dividend	$1.63
Growth	8%
Required	10%

What is the value of the stock?

Problem 11-15 - PE Model

Suppose that a security earned $4.53 per share for the year and has a price of $85 per share. Earnings are expected to grow at 0.12 % annually for the next five years. Also suppose the PE multiple is expected to increase 0.1% between now and five years.

EPS	$4.53
Price	$85
Growth Rate	12%
PE Change	10%
Years	5

What is the expected price in five years?