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The next dividend payment by DEF, Inc., will be $2.42 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever.

  1. The next dividend payment by DEF, Inc., will be $2.42 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $29.1 per share, what is the required return (in percent)? Answer to at least three decimals.
  2. Suppose you know that a company's stock currently sells for $36.99 per share and the required return on the stock is 9.79 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? Answer to two decimals.
  3. PQR, Inc., has an issue of preferred stock outstanding that pays a $3.75 dividend every year, in perpetuity. If this issue currently sells for $38.86 per share, what is the required return in percent? Answer to two decimals.
  4. The stock price of XYZ Co. is $22.8. Investors require an 7.32 percent rate of return on similar stocks. If the company plans to pay a dividend of $2.4 next year, what constant growth rate (in percent) is expected for the company's stock price? Answer to two decimals.

6.HQZ Inc., has just paid a dividend of $4.52 per share and has announced that it will increase the dividend by $3.4 per share for eachof the next four years, and then never pay another dividend. If you require a return of 6.32 percent on the company's stock, how much will you pay for a share today? Answer to two decimals.


7.BlueCorp. is growing quickly. Dividends are expected to grow at a rate of 15 percent for the next three years, with the growth rate falling off to a constant 3.9 percent thereafter. If the required return is 7.91 percent and the company just paid a $3.71 dividend, what is the current share price? Answer to two decimals.


8.ABC Corporation stock currently sells for $67.98 per share. The market requires a return of 12.52 percent on the firm's stock. If the company maintains a constant 3.8 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? Answer to two decimal places.


9.A mature manufacturing firm just paid a dividend of $6.94 but management expects to reduce the payout by 4.34 percent per year, indefinitely. If you require a return of 9.71 percent on this stock, what will you pay for a share today? Answer to two decimals.

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