Q2. (50 points) (Show all steps) If a firm just paid a dividend of $7.00 and the firm's capitalization rate is 11%(r= 11%). a) What is the present stock price? b) What is the present stock price if the firm expected to grow at a constant rate of 7% indefinitely? What is my dividend yield? c) If the firm expected to grow at 15% for the next 4 years and after that the firm is expected to grow at 7% indefinitely? 1. What is the present stock price? II. If I bought the stock today and decided to sell it in three years what is my annual rate of return on this stock? What is my capital gain yield? Explain why me rate of return is not the same as capital gain? III. How much should I be willing to pay today to receive the stock in three years from now? Why it is different from Po? Explain. IV. What is P18? If my required rate of return is 10% should I buy the stock today and sell it in 18 years. Clearly Explain. V. If I bought the stock at year 0 (PO) and I was able to sell the stock in year 5 P.) for $650, what will be my annul return on investment (HPY)? Explain what is my annul return on investment made from d) Given part b assume that the CEO of the firm is thinking to payout only $3 in dividend and plowback the rest (S4) in a new project. The cash Cuimd Q2. (50 points) (Show all steps) If a firm just paid a dividend of $7.00 and the firm's capitalization rate is 11%(r= 11%). a) What is the present stock price? b) What is the present stock price if the firm expected to grow at a constant rate of 7% indefinitely? What is my dividend yield? c) If the firm expected to grow at 15% for the next 4 years and after that the firm is expected to grow at 7% indefinitely? 1. What is the present stock price? II. If I bought the stock today and decided to sell it in three years what is my annual rate of return on this stock? What is my capital gain yield? Explain why me rate of return is not the same as capital gain? III. How much should I be willing to pay today to receive the stock in three years from now? Why it is different from Po? Explain. IV. What is P18? If my required rate of return is 10% should I buy the stock today and sell it in 18 years. Clearly Explain. V. If I bought the stock at year 0 (PO) and I was able to sell the stock in year 5 P.) for $650, what will be my annul return on investment (HPY)? Explain what is my annul return on investment made from d) Given part b assume that the CEO of the firm is thinking to payout only $3 in dividend and plowback the rest (S4) in a new project. The cash Cuimd
