Problem 8-7

Tyler Inc.'s most recent annual dividend was $3.50 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe better times are ahead and future growth will be in the neighborhood of 5%. The stock is currently selling for $78. Stocks similar to Tyler earn returns ranging from 8% to 10%.

1. Calculate value for a share of Tyler at interest rate of 8%. Round the answer to two decimal places. $ Calculate value for a share of Tyler at interest rate of 9%. Round the answer to two decimal places. $ Calculate value for a share of Tyler at interest rate of 10%. Round the answer to two decimal places. $
2. Do you think Tyler is a good investment for the long run - that is, for someone planning to hold onto it for 10 or more years?
3. Do you think it's a good investment for the short term? That is, should you buy it with the expectation of selling in a relatively short period, say a year or less?

4. Repeat the calculations in part (a) assuming that instead of rising, Tyler's growth rate remains at 4% or declines to 3%. Round your answers to two decimal places. Growth rate of 4%, interest rate of 8% $ Growth rate of 4%, interest rate of 9% $ Growth rate of 4%, interest rate of 10% $ Growth rate of 3%, interest rate of 8% $ Growth rate of 3%, interest rate of 9% $ Growth rate of 3%, interest rate of 10% $