Stock Valuation

1. ABC.Corp pays a constant $9 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required rate of return on this stock is 11%, what is the current share price?

1. ABC Inc. is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earning to fuel growth. The company will pay a $7 per share dividend in 10 years and will increase the dividend by 6 percent per year, thereafter. If the required rate of return on this stock is 14 percent, what is the current share price?

1. ABC Corp. is expected to pay the following dividends over the next four years: $6.50, $5, $3, and $2. Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends, forever. If the required rate of return on the stock is 16 percent, what is the current share price?

1. ABC Co. is growing quickly. Dividends are expected to grow at 32 percent per year during the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required rate of return is 15 percent and the company just paid a $2.25 dividend, what is the current share price?

ABC is a mature manufacturing firm. The company just paid a $9 dividend, but management expects to reduce the payout by 8 percent per year, indefinitely. If you require a 14 percent return on this stock, what will you pay for a share today?