Problem 9.09

The current stock price of Sandhill, Inc., is $43.60. If the required rate of return is 20 percent, what is the dividend paid by this firm if the dividend is not expected to grow in the future? (Round answer to 2 decimal places, e.g. 15.25.)

Problem 9.10

Cullumber Corp. paid a dividend of $2.66 yesterday. The companys dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Cullumber require a rate of return of 19 percent, what should be the market price of Cullumber stock? (Round dividend to 3 decimal places, e.g. 3.756 and round final answer to 2 decimal places, e.g. 15.25.)

Problem 9.11

Crane, Inc., is a consumer products firm that is growing at a constant rate of 4.0 percent. The firms last dividend, which was just paid, was $3.36. If the required rate of return is 16.0 percent, what is the market value of this stock if dividends grow at the same rate as the firm? (Do not round intermediate calculations. Round answer to 2 decimal places, e.g. 15.20.)

Problem 9.13

Sandhill, Inc., is expected to grow at a constant rate of 7.00 percent. If the companys next dividend, which will be paid in a year, is $1.65 and its current stock price is $22.35, what is the required rate of return on this stock? (Round intermediate calculations to 4 decimal places, e.g. 1.5325 and final answer to 2 decimal places, e.g. 17.54%.)

Problem 9.15

The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.50 on this stock. What is the current price of this preferred stock given a required rate of return of 10.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Problem 9.17

Each quarter, Cullumber, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $64.00. If the required rate of return for such stocks is 18.00 percent, what is the quarterly dividend paid by this Cullumber? (Round answer to 2 decimal places, e.g. 15.25.)

Problem 9.21 (Solution Video)

You own shares of Sheridan DVD Company and are interested in selling them. With so many people downloading music these days, sales, profits, and dividends at Sheridan have been declining 8 percent per year. The firm just paid a dividend of $1.90 per share. The required rate of return for a stock this risky is 15 percent. If dividends are expected to decline at 8 percent per year, what is a share of the stock worth today? (Round answer to 2 decimal places, e.g. 15.20.)

Problem 9.14

Cullumber Energy Company has issued perpetual preferred stock with a stated (par) value of $100 and a dividend of 3.5 percent. If the required rate of return is 10.00 percent, what is the stock's current market price? (Round answer to 2 decimal places, e.g. 15.25.)

Problem 9.27 (Solution Video)

Sheridan Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 6 percent. If the required rate of return is 22.00 percent, what is the current value of the stock? (Round all intermediate calculations and final answer to 2 decimal places, e.g. 15.20.)

Sample Test Problem 9.03

Wildhorse, Inc., is a mature firm that is growing at a constant rate of 5.65 percent per year. The last dividend that the firm paid was $1.20 per share. If dividends are expected to grow at the same rate as the firm and the required rate of return on Wildhorses stock is 11 percent, what is the market value of the companys stock? (Round answer to 2 decimal places, e.g. 52.75.)

Sample Test Problem 9.04

Sheridan Corporation will pay dividends of $2.60, $2.80, and $3.50 in the next three years. After three years, the dividends are expected to grow at a constant rate of 5 percent per year. If the required rate of return is 15.0 percent, what is the current value of the Sheridan common stock? (Round answer to 2 decimal places, e.g. 52.75.)