• Whizzkids, Inc., is experiencing a period of rapid growth. Earnings and dividends per share are expected to grow at a rate of 18 percent during the next two years, 15 percent in the third year, and at a constant rate of 6 percent thereafter. Whizzkids? last dividend, which has just been paid, was $1.15. If the required rate of return on the stock is 12percent, what is the price of a share of the stock today?

Problems on Stocks (Fin-441) 1. Pagemaster Enterprises just reported earnings of $2 million. It plans to retain 40 percent of its earnings. The historical return on equity (ROE) has been 0.16, a figure that is expected to continue into the future. Pagemaster Enterprises has 1,000,000 shares of stock outstanding. The stock is selling at $10. What is the required return on the stock? 2. KL Airlines paid an annual dividend of $1.42 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $2 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent? 3. The newspaper reported last week that Bradley Enterprises earned $20 million. The report also stated that the firm's return on equity remains on its historical trend of 14 percent. Bradley retains 60 percent of its earnings. What is the firm's growth rate of earnings? What will next year's earnings be? 4. Consider the stock of Davidson Company that will pay an annual dividend of $2 in the coming year. The dividend is expected to grow at a constant rate of 5 percent permanently. The market requires a 12-percent return on the company. What is the current price of a share of the stock? 5. Langley Enterprises pays a constant dividend of $0.60 a share. The company announced today that it will continue to pay the dividend for another 2 years after which time all dividends will cease. What is one share of this stock worth today if the required rate of return is 16.5 percent? 6. Whizzkids, Inc., is experiencing a period of rapid growth. Earnings and dividends per share are expected to grow at a rate of 18 percent during the next two years, 15 percent in the third year, and at a constant rate of 6 percent thereafter. Whizzkids' last dividend, which has just been paid, was $1.15. If the required rate of return on the stock is 12percent, what is the price of a share of the stock today? 7. Zylo, Inc. preferred stock pays a $7.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 9.75 percent? 8. Marshall Arts Studios just paid an annual dividend of $1.36 a share. The firm plans to pay annual dividends of $1.40, $1.46, and $1.58 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a 9 percent discount rate